<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
REGISTRATION STATEMENT NO. 333-33915
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PLAYTEX PRODUCTS, INC.
PLAYTEX SALES & SERVICES, INC.
PLAYTEX MANUFACTURING, INC.
PLAYTEX BEAUTY CARE, INC.
SUN PHARMACEUTICALS CORP.
PLAYTEX INTERNATIONAL CORP.
PLAYTEX INVESTMENT CORP.
TH MARKETING CORP.
SMILE-TOTE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2676 51-0312772
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
300 NYALA FARMS ROAD PAUL E. YESTRUMSKAS, ESQ.
WESTPORT, CT 06880 300 NYALA FARMS ROAD
(203) 341-4000 WESTPORT, CT 06880
(ADDRESS, INCLUDING ZIP CODE, (203) 341-4000
AND TELEPHONE NUMBER, INCLUDING AREA CODE, (NAME, ADDRESS, INCLUDING ZIP CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
</TABLE>
------------------------
COPIES TO:
MITCHELL S. FISHMAN, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
------------------------
APPROXIMATE DATE OF PROPOSED COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 29, 1997
PROSPECTUS
[LOGO]
PLAYTEX PRODUCTS, INC.
OFFER TO EXCHANGE ITS 8 7/8% SENIOR NOTES DUE 2004, SERIES B
FOR ANY AND ALL OUTSTANDING 8 7/8% SENIOR NOTES DUE 2004, SERIES A
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1997, UNLESS EXTENDED.
Playtex Products, Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal" and together with this Prospectus, the "Exchange Offer"), to
exchange its 8 7/8% Senior Notes due 2004, Series B (the "Exchange Notes") which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for any and all outstanding 8 7/8%
Senior Notes due 2004, Series A (the "Initial Notes," and, together with the
Exchange Notes, the "Senior Notes"), of which $150,000,000 principal amount is
outstanding. The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Initial Notes being tendered for exchange. However, the
Exchange Offer is subject to the absence of certain conditions which may be
waived by the Company. See "The Exchange Offer--Certain Conditions to the
Exchange Offer." Subject to the absence or waiver of such conditions, the
Company will accept for exchange any and all Initial Notes validly tendered on
or prior to 5:00 p.m., New York City time, on , 1997, unless the
Exchange Offer is extended (the "Expiration Date"). Initial Notes may be
tendered only in integral multiples of $1,000. The date of acceptance and
exchange of the Initial Notes (the "Exchange Date") will be the fourth business
day following the Expiration Date, unless an earlier date is selected by the
Company. Initial Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date;
otherwise such tenders are irrevocable. The Exchange Notes will be issued and
delivered promptly after the Exchange Date.
The terms of the Exchange Notes are identical in all material respects to
the terms of the Initial Notes, except that the Exchange Notes have been
registered under the Securities Act and are generally freely transferable by
holders thereof and are issued without any covenant upon the Company regarding
registration under the Securities Act. See "The Exchange Offer--Resale of
Exchange Notes." The Exchange Notes will evidence the same debt as the Initial
Notes and will be issued under and be entitled to the benefits of the Indenture
(as defined herein). For a complete description of the terms of the Exchange
Notes, see "Description of the Senior Notes." There will be no cash proceeds to
the Company from this Exchange Offer.
The Exchange Notes are unsecured senior obligations of the Company, will
rank senior in right of payment to all existing and future Subordinated
Indebtedness (as defined herein) of the Company and will rank PARI PASSU in
right of payment with all existing and future Senior Indebtedness (as defined
herein) of the Company, including indebtedness under the Credit Facilities (as
defined herein). The Exchange Notes will be jointly and severally guaranteed
(the "Guarantees") on an unsecured basis by all of the Company's existing and
future subsidiaries other than foreign and certain domestic subsidiaries of the
Company (the "Guarantors"). The Company's obligations under the Credit
Facilities are, however, secured by a first priority lien on all of the
Company's accounts receivable, inventory and intangible assets, and,
accordingly, such indebtedness effectively will rank prior to the Exchange Notes
with respect to such assets. The Indenture permits the Company and any
Subsidiary (as defined herein) to incur additional debt, including secured debt,
subject to certain limitations. See "Description of the Senior Notes."
The Initial Notes were originally issued and sold on July 21, 1997 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Initial Notes may not be reoffered, resold, or otherwise pledged, hypothecated
or transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Based upon interpretations by the staff of the Securities and Exchange
Commission (the "SEC") issued to third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial
Notes may be offered for resale, resold and otherwise transferred by holders
thereof (other than any holder which is a broker-dealer or an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of business and such holders have no arrangement with any person to
participate in the distribution of such Exchange Notes. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with a resale of
such Exchange Notes. This Prospectus, as it may be amended or supplemented from
time to time, may be used by such broker-dealers in connection with such
resales. See "The Exchange Offer--Resale of Exchange Notes."
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list any Senior Notes
on a national securities exchange or to apply for quotation of any Senior Notes
through the National Association of Securities Dealers Automated Quotation
System. Any Initial Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that Initial Notes are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered and tendered but
unaccepted Initial Notes could be adversely affected. Following consummation of
the Exchange Offer, the holders of Initial Notes will continue to be subject to
the existing restrictions on transfers thereof, and the Company will have no
further obligation to such holders to provide for the registration under the
Securities Act of the Initial Notes held by them. No assurance can be given as
to the liquidity of the trading market for either the Initial Notes or the
Exchange Notes.
SEE "RISK FACTORS" ON THE BEGINNING ON PAGE 12 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN
INVESTMENT IN THE EXCHANGE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
MICHAEL F. GOSS, CHIEF FINANCIAL OFFICER, AT 300 NYALA FARMS ROAD, WESTPORT,
CONNECTICUT 06880, TELEPHONE NUMBER (203) 341-4000. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1997.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information can be inspected and copied
at the Public Reference Section of the SEC's office at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices in New
York (7 World Trade Center, 13th Floor, New York, New York 10048) and Chicago
(Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661).
Copies of such reports, proxy statements and information may be obtained at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the SEC maintains a Web site
that contains reports, proxy statements and other information regarding
registrants (such as the Company) that file electronically with the SEC. The
address of such site is http://www.sec.gov. In addition, copies of such
information may also be inspected and copied at the office of The New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005, upon which the
Company's common stock is listed.
The Company has filed with the SEC a Registration Statement on Form S-4
(together with all amendments and exhibits, the "Registration Statement") under
the Securities Act with respect to the Exchange Notes offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Statements contained in this Prospectus relating to the
contents of any contract or other document referred to herein are not
necessarily complete, and reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement. For further
information, reference is hereby made to the Registration Statement and the
documents incorporated herein by reference, which may be examined without charge
at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies thereof may be obtained from the
SEC upon payment of the prescribed fees. While any Senior Notes remain
outstanding, the Company will make available, upon request to any holder and any
prospective purchaser of Senior Notes the information required pursuant to Rule
144A(d)(4) under the Securities Act during any period in which the Company is
not subject to Section 13 or 15(d) of the Exchange Act. Any such request should
be directed to Michael F. Goss, Chief Financial Officer, Playtex Products Inc.,
300 Nyala Farms Road, Westport, Connecticut 06880, telephone number (203)
341-4000.
The Indenture provides that the Company will furnish to the Trustee (as
defined herein) and the holders of the Senior Notes copies of all periodic
reports required to be filed with the SEC under the Exchange Act, and shall mail
such periodic reports to the holders of the Senior Notes within 30 days of
filing with the SEC. If the Company is not subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company must nonetheless continue
to submit to the Trustee and the holders of the Senior Notes (i) the annual
audited financial statements of the Company and its Subsidiaries, prepared on a
consolidated basis in conformity with GAAP, within 120 days after the end of
each fiscal year of the Company, and (ii) such of the supplementary and periodic
information, documents and reports which may be required pursuant to Section 13
of the Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules and
regulations. The Indenture provides that the Company will file a copy of such
information and reports with the SEC for public availability (unless the SEC
will not accept such a filing). The Company must provide copies of such
i
<PAGE>
information and reports to the holders of the Senior Notes within 120 days of
the Company's fiscal year end in the case of annual reports, and within 75 days
of the end of each of the Company's first three fiscal quarters in the case of
quarterly reports.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the SEC pursuant
to the Exchange Act (Commission File No. 1-12620) and are hereby incorporated
herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) the Company's Proxy Statement dated May 20, 1997, relating to its 1997
Annual Meeting of Shareholders;
(3) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 28, 1997 filed on August 6, 1997; and
(4) the Company's Current Report on Form 8-K dated July 21, 1997 filed on
July 28, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act (i) subsequent to the date of the initial Registration
Statement of which this Prospectus is a part and prior to the effectiveness of
such Registration Statement, or (ii) subsequent to the date of this Prospectus
and prior to the termination of the offering made by this Prospectus, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing thereof.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other document subsequently filed with the SEC which is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to Michael F. Goss, Chief Financial Officer, at 300 Nyala Farms Road,
Westport, Connecticut 06880, telephone number (203) 341-4000.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
ii
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made in
this Prospectus. Any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimated," "intends," "plans," "projection" and "outlook") are not historical
facts and may be forward-looking and, accordingly, such statements involve
estimates, assumptions and uncertainties which could cause actual results to
differ materially from those expressed in the forward-looking statements.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the factors discussed throughout this Prospectus,
and particularly in the risk factors set forth herein under "Risk Factors."
Among the key factors that have a direct bearing on the Company's results of
operations are the substantial indebtedness and significant debt service
obligations that the Company will have upon consummation of this Offering;
intensified competition; increased spending for advertising and promotion; new
product initiatives; the Company's ability to implement its business and
acquisition strategy and to successfully integrate acquired companies into the
Company; the loss of a significant customer; product liability litigation and
changes in government regulation. These and other factors are discussed herein
under "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Prospectus.
The risk factors described herein could cause actual results or outcomes to
differ materially from those expressed in any forward-looking statements of the
Company made by or on behalf of the Company and investors, therefore, should not
place undue reliance on any such forward-looking statements. Further, any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the Company's business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.
PATENTS AND TRADEMARKS
The Company owns or has the proprietary rights to trademarks for
Playtex-Registered Trademark-, Gentle Glide-Registered Trademark-,
Portables-Registered Trademark-, Silk Glide-Registered Trademark-, Soft
Comfort-Registered Trademark-, Slimfits-TM-, Comfortflow-Registered Trademark-,
Drop-Ins-Registered Trademark-, Spill-Proof-TM-, QuickStraw-TM-, Most Like
Mother-Registered Trademark-, Natural Action-Registered Trademark-,
Cherubs-Registered Trademark-, Living-Registered Trademark-,
HandSaver-Registered Trademark-, Banana Boat-Registered Trademark-, Get on The
Boat-Registered Trademark-, BioSun-TM-, Tan Express-Registered Trademark-,
Action Sport-TM-, Bite Block-TM-, HeatCare-TM-, Jhirmack-Registered Trademark-
and Tek-Registered Trademark-. The Company also owns a royalty-free license in
perpetuity to the Woolite-Registered Trademark- trademark for rug and upholstery
cleaning products in the United States and Canada. This Prospectus also contains
product names, trademarks and trade names of other companies.
iii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS OTHERWISE INDICATED: (I) THE SOURCE OF ALL MARKET SHARE DATA IN THIS
PROSPECTUS IS ACNIELSEN CORPORATION, AND SUCH DATA INCLUDES DATA REPORTED BY
FOOD STORES, DRUG STORES AND MASS MERCHANDISERS, (II) ALL MARKET SHARE DATA FOR
FEMININE CARE AND INFANT CARE PRODUCTS ARE CALCULATED BASED ON DOMESTIC DOLLAR
VOLUME AND (III) ALL OTHER MARKET SHARE DATA ARE CALCULATED BASED ON DOMESTIC
UNIT VOLUME. UNLESS THE CONTEXT INDICATES OR OTHERWISE REQUIRES, REFERENCES IN
THIS PROSPECTUS TO "PLAYTEX" OR THE "COMPANY" ARE TO PLAYTEX PRODUCTS, INC. AND
ITS SUBSIDIARIES ON A CONSOLIDATED BASIS.
THE COMPANY
The Company is a leading manufacturer and marketer of a diversified line of
well recognized branded consumer products, including PLAYTEX tampons, PLAYTEX
infant care products, BANANA BOAT sun care products, PLAYTEX household latex
gloves and WOOLITE rug and upholstery cleaning products. In 1996, approximately
94% of the Company's net sales were derived from the sale of products in which
it holds the number one or two market share position. Since 1994, the Company
has leveraged its brand name recognition, stable market position and strong
distribution network to grow its Infant Care and Sun Care businesses, both of
which have experienced rapid growth in market share and net sales. For the
twelve months ended June 28, 1997, the Company generated net sales and EBITDA
(as defined herein) of $495.1 million and $122.8 million, respectively.
The following table sets forth the Company's principal product lines and
certain related data for 1996:
<TABLE>
<CAPTION>
PERCENT
MARKET MARKET OF
PRODUCT PRIMARY BRAND NAME POSITION SHARE NET SALES NET SALES
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Feminine Care...................... PLAYTEX #2 26% $ 225.5 45%
Infant Care........................ PLAYTEX 1 36 109.5 22
Sun Care........................... BANANA BOAT, BIOSUN 2 19 73.3 15
Household Latex Gloves............. PLAYTEX 1 38 32.8 7
Rug & Upholstery Cleaning.......... WOOLITE 2 20 27.7 5
Other.............................. 29.9 6
------ -----
Total........................ $ 498.7 100%
------ -----
------ -----
</TABLE>
COMPETITIVE STRENGTHS
The Company believes it is distinguished by the following competitive
strengths:
EXCEPTIONAL CONSUMER FRANCHISE. The Company's core brand names--PLAYTEX,
BANANA BOAT and WOOLITE--are well known and respected by both consumers and
retailers for their high quality and product innovations. To further develop and
maintain brand name awareness and consumer loyalty, the Company has spent, on
average, in excess of $100 million annually on advertising and promotional
support over the past three years.
STRONG AND STABLE CASH FLOWS. The strength of the Company's consumer
franchise and brand names is reflected in its consistently strong cash flows and
operating margins. These characteristics, together with relatively low levels of
capital expenditures, provide the Company with financial flexibility to reduce
indebtedness and implement its growth strategy.
1
<PAGE>
LEADING MARKET POSITIONS IN ATTRACTIVE CATEGORIES. In 1996, the Company
generated approximately 94% of its net sales from categories in which it holds a
number one or two market share. Furthermore, the Company believes that the core
categories in which it competes are inherently attractive. The tampon category
is characterized by slow but steady growth, a high degree of customer brand
loyalty and a relatively low sensitivity to economic cycles. The Infant Care and
Sun Care categories are growing more rapidly due to the receptiveness of
consumers to new products and increased consumer awareness of sun care issues,
respectively. Further, the Company believes that both the Infant Care and Sun
Care categories are consolidating and that this consolidation favors market
leaders, such as the Company, with marketing expertise, broad product lines and
national distribution.
CONSUMER-FOCUSED PRODUCT INNOVATION. The Company devotes significant
resources and attention to product innovation and consumer research to develop
products which offer new and distinctive benefits to its consumers. In 1996, the
Company continued its history of product innovation by introducing (i) SLIMFITS,
a tampon with a softer and narrower plastic applicator designed to appeal to
teenagers; (ii) DROP-INS, ready-formed disposable baby bottles, a high
convenience product aimed at reusable bottle users; and (iii) BIOSUN, a
newly-formulated line of sun care products aimed at active, health-conscious
consumers.
WELL-ESTABLISHED DISTRIBUTION CHANNELS. The Company's products are
distributed in virtually every major food chain, drug chain, mass merchandiser
and price club in the United States through a combination of direct sales
personnel and independent brokers. This depth and breadth of distribution
permits the Company to rapidly introduce new products and to quickly realize
synergies in integrating acquired product lines. To further enhance its
relationship with its retailers, the Company is focusing sales and marketing
efforts on category management programs. In these programs, the Company works
with retailers to increase category sales and profitability through detailed
analysis of consumer buying habits and improved merchandising techniques. The
Company believes that such programs strengthen the relationship between the
Company and the retailer and increase the Company's sales.
GROWTH STRATEGY
In 1995, partnerships managed by Haas Wheat & Partners Incorporated ("Haas
Wheat"), a private investment firm, invested $180.0 million in the Company. The
proceeds of the equity investment were used by the Company to reduce bank debt
and increase its operating and financial flexibility. In addition, Michael R.
Gallagher, a seasoned executive with over 28 years of consumer marketing and
general management experience, was appointed chief executive officer in order to
lead the Company's growth strategy, the principal features of which are outlined
below:
CONTINUE SALES GROWTH THROUGH MARKET SHARE GAINS. The Company has
consistently gained market share in its Infant Care and Sun Care businesses due
to product innovations, creative merchandising techniques, strong consumer
marketing programs and increases in the number of stock keeping units ("SKUs")
carried per point of distribution. In the Infant Care business, the Company's
net sales grew at a compound annual rate of 19% between 1994 and 1996, while its
market share increased from 30% to 36% over the same period. In the Sun Care
business, the Company's net sales grew at a compound annual rate of 24% between
1994 and 1996 and its market share increased from approximately 16% in 1994 to
19% in 1996.
MAKE SYNERGISTIC ACQUISITIONS. The Company intends to accelerate its growth
in net sales and cash flow by acquiring growing brands in attractive categories.
The Company seeks to acquire other consumer product companies or brands whose
products may be sold through the Company's distribution channels and that would
benefit from the PLAYTEX brand name or the Company's expertise in marketing,
sales and product development. The acquisition of the BANANA BOAT product line
demonstrates the Company's ability to add value to the businesses it acquires.
Since the Company first acquired the distribution rights to the BANANA BOAT
brand name, its market share has grown from approximately 12% in 1992 to 19% in
1996,
2
<PAGE>
principally as a result of new product introductions and significant
improvements in the brand's distribution and marketing.
SELECTIVELY EXTEND BRANDS INTO NEW PRODUCT CATEGORIES. The Company intends
to extend its PLAYTEX and BANANA BOAT brand names into new product categories in
order to capitalize on its brand name recognition, its reputation for
customer-focused product development and its well-established distribution
network. Initially, the Company plans to focus on personal care categories
closely related to the Company's existing businesses.
BUILD INTERNATIONAL SALES. Historically, less than 5% of the Company's net
sales have been generated outside the United States and Canada. In July 1996,
the Company formed a sales and marketing team dedicated to strengthening the
Company's competitive position overseas. The team is currently seeking to
identify strong local partners to distribute the Company's products abroad and
is also seeking to capitalize on its strong domestic relationship with key U.S.
retailers with international operations, such as
Toys R Us, Inc. ("Toys R Us") and Wal-Mart Stores, Inc. ("Wal-Mart").
The Company intends to focus its initial efforts on its Infant Care and Sun
Care products, primarily in Europe, Latin America and the Pacific Rim.
3
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
THE EXCHANGE OFFER................ The Company is offering to exchange up to $150,000,000
aggregate principal amount of the Exchange Notes for any
and all of its outstanding Initial Notes. The terms of
the Exchange Notes are identical in all material
respects (including principal amount, interest rate and
maturity) to the terms of the Initial Notes for which
they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Notes have been registered
under the Securities Act and are freely transferrable by
holders thereof (other than as provided herein), and are
not subject to any covenant regarding registration under
the Securities Act. See 'The Exchange Offer.'
EXPIRATION DATE; WITHDRAWAL OF
TENDER.......................... The Exchange Offer will expire at 5:00 p.m. New York
City time, on , 1997, unless the Exchange Offer
is extended by the Company, in which case the term
'Expiration Date' means the latest date and time to
which the Exchange Offer is extended. See 'The Exchange
Offer--Expiration Date; Extension; Termination;
Amendment.' Tenders may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration
Date. See 'The Exchange Offer--Withdrawal Rights.'
INTEREST PAYMENTS................. Interest on the Exchange Notes shall accrue from the
last interest payment date (January or July 15, each an
'Interest Payment Date') on which interest was paid on
the Initial Notes so surrendered or, if no interest has
been paid on such Initial Notes, from July 21, 1997.
NO MINIMUM CONDITION.............. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Initial Notes being
tendered for exchange.
EXCHANGE DATE..................... The date of acceptance and exchange of the Initial Notes
will be the fourth business day following the Expiration
Date, unless an earlier date is selected by the Company
and the Company notifies the Exchange Agent (as defined
herein) of such earlier date.
CONDITIONS TO THE EXCHANGE
OFFER........................... The Company shall not be required to accept for
exchange, or to issue Exchange Notes in exchange for,
any Initial Notes and may terminate or amend the
Exchange Offer, if any of certain customary conditions
exist, the occurrence of which may be waived by the
Company. The Company currently expects that each of the
conditions will be satisfied and that no waivers will be
necessary. See 'The Exchange Offer--Certain Conditions
to the Exchange Offer.'
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
PROCEDURES FOR TENDERING INITIAL
NOTES........................... Each holder of Initial Notes wishing to tender such
notes must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or such
facsimile, together with the Initial Notes and any other
required documentation to the Exchange Agent at the
address set forth in the Letter of Transmittal. See 'The
Exchange Offer--Procedures for Tendering Initial Notes'
and 'Plan of Distribution.'
USE OF PROCEEDS................... There will be no proceeds to the Company from the
exchange of Exchange Notes pursuant to the Exchange
Offer. For a discussion of the use of the net proceeds
received by the Company from the issuance of the Initial
Notes see 'Use of Proceeds.'
FEDERAL INCOME TAX
CONSIDERATIONS.................. The exchange of Exchange Notes pursuant to the Exchange
Offer should not be a taxable event for federal income
tax purposes. See 'Certain Federal Income Tax
Considerations.'
SPECIAL PROCEDURES FOR BENEFICIAL
OWNERS.......................... Any beneficial owner whose Initial Notes are registered
in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct
such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to
tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing
the Letter of Transmittal and delivering the Initial
Notes, either make appropriate arrangements to register
ownership of the Initial Notes in such beneficial
owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered
ownership may take considerable time. See 'The Exchange
Offer--Procedures for Tendering Initial Notes.'
GUARANTEED DELIVERY PROCEDURES.... Holders of Initial Notes who wish to tender their
Initial Notes and whose Initial Notes are not
immediately available or who cannot deliver their
Initial Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date must tender
their Initial Notes according to the guaranteed delivery
procedures set forth in 'The Exchange Offer--Procedures
for Tendering Initial Notes.'
ACCEPTANCE OF INITIAL NOTES AND
DELIVERY OF EXCHANGE NOTES...... On the Exchange Date, the Company will accept for
exchange any and all Initial Notes which are properly
tendered in the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Exchange Date. See 'The
Exchange Offer--Acceptance of Initial Notes for
Exchange; Delivery of Exchange Notes.'
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
CONSEQUENCES OF FAILURE TO
EXCHANGE........................ Holders of the Initial Notes who do not tender their
Initial Notes in the Exchange Offer will continue to
hold such Initial Notes and will be entitled to all the
rights and limitations applicable thereto under the
Indenture dated as of July 21, 1997 between the Company,
the Guarantors and Marine Midland Bank, as trustee (the
"Trustee") relating to the Initial Notes and the
Exchange Notes (the 'Indenture'), except for any such
rights under the Registration Rights Agreement (as
defined herein) that by their terms terminate or cease
to have further effectiveness as a result of the making
of, and the acceptance for exchange of all validly
tendered Initial Notes pursuant to the Exchange Offer.
Holders of Initial Notes who do not exchange their
Initial Notes for Exchange Notes pursuant to the
Exchange Offer will continue to be subject to the
restrictions on transfer of such Initial Notes as set
forth in the legend therein as a consequence of the
offer or sale of the Initial Notes pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and
applicable state securities laws. In general, the
Initial Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws.
The Company does not currently anticipate that it will
register the Initial Notes under the Securities Act. To
the extent that Initial Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered
or tendered but unaccepted Initial Notes could be
adversely affected. See 'The Exchange
Offer--Consequences of Failure to Exchange.'
REGISTRATION RIGHTS............... The Company and the Guarantors entered into a
Registration Rights Agreement dated as of July 21, 1997
(the 'Registration Rights Agreement') with Donaldson
Lufkin & Jenrette Securities Corporation (the 'Initial
Purchaser'), for the benefit of all holders of Initial
Notes, in which it agreed to make the Exchange Offer.
The Registration Rights Agreement provides that if the
Company fails to consummate the Exchange Offer on or
prior to December 18, 1997, the Company will file a
shelf registration statement (the 'Shelf Registration
Statement') to cover resales of Senior Notes by holders
who provide certain information required for inclusion
in the Shelf Registration Statement, and who agree to be
bound by the terms of the Registration Rights Agreement.
Upon a Registration Default (as defined herein), the
Company will be required to pay certain Liquidated
Damages (as defined herein) to the affected holders of
Senior Notes. See 'Exchange Offer; Registration Rights.'
EXCHANGE AGENT.................... Marine Midland Bank is serving as exchange agent (the
'Exchange Agent') in connection with the Exchange Offer.
See 'The Exchange Offer--Exchange Agent.'
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
RESALE OF EXCHANGE NOTES.......... Based upon interpretations by the staff of the SEC
issued to third parties, the Company believes the
Exchange Notes issued pursuant to the Exchange Offer in
exchange for Initial Notes may be offered for resale,
resold and otherwise transferred by holders thereof
(other than any holder which is a broker-dealer or an
'affiliate' of the Company within the meaning of Rule
405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of
the Securities Act provided that such Exchange Notes are
acquired in the ordinary course of business and such
holders have no arrangement with any person to
participate in the distribution of such Exchange Notes.
Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with a resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from
time to time, may be used by such broker-dealers in
connection with such resales. See 'The Exchange
Offer--Resale of Exchange Notes.'
</TABLE>
THE EXCHANGE NOTES
<TABLE>
<S> <C>
ISSUER............................ Playtex Products, Inc.
SENIOR NOTES OFFERED.............. $150,000,000 principal amount of 8 7/8% Senior Notes due
2004.
MATURITY DATE..................... July 15, 2004.
INTEREST PAYMENT DATES............ January 15 and July 15 of each year, commencing January
15, 1998.
RANKING........................... The Exchange Notes will be general unsecured obligations
of the Company, ranking senior in right of payment to
all existing and future Subordinated Indebtedness of the
Company and PARI PASSU in right of payment to all
existing and future Senior Indebtedness of the Company.
The Company's obligations under the Credit Facilities,
however, are secured by a first priority lien on
substantially all of the receivables, inventories and
intangible assets of the Company and its domestic
Subsidiaries and, accordingly, such indebtedness
effectively will rank prior to the Exchange Notes and
the Guarantees with respect to such assets.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
OPTIONAL REDEMPTION............... The Exchange Notes will be redeemable at the option of
the Company, in whole or in part, on or after July 15,
2001, at the redemption prices set forth herein,
together with accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption. In addition,
at any time prior to July 15, 2000, the Company may
redeem up to 35% of the original aggregate principal
amount of the Exchange Notes with the net proceeds from
the sale by the Company of Qualified Capital Stock in
one or more offerings within 60 days thereof, at a
redemption price equal to 108 7/8% of the aggregate
principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of
redemption.
CHANGE OF CONTROL................. Upon a Change of Control, (i) each holder of the
Exchange Notes will have the right to require the
Company to purchase all or any part of such holder's
Exchange Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of
repurchase, and (ii) at any time prior to July 15, 2001,
the Company will have the option to redeem the Exchange
Notes, in whole or in part, within 90 days of such
Change of Control, at a redemption price equal to the
principal amount thereof, together with accrued and
unpaid interest and Liquidated Damages, if any, to the
date of redemption, plus the Applicable Premium.
ASSET SALE PROCEEDS............... The Company will be obligated in certain circumstances
to make an offer to purchase the Exchange Notes at a
purchase price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the purchase date with the Net Cash
Proceeds of Asset Sales.
GUARANTEES........................ The Exchange Notes will be jointly and severally
guaranteed on an unsecured senior basis by all of the
Company's existing and future subsidiaries, other than
Foreign Subsidiaries and certain other subsidiaries of
the Company.
RESTRICTIVE COVENANTS............. The Indenture will contain certain covenants, including,
but not limited to, covenants with respect to: (i)
limitations on indebtedness; (ii) limitations on
restricted payments; (iii) limitations on transactions
with affiliates; (iv) limitations on liens; (v)
limitations on sale of assets; (vi) limitations on
issuance and sale of capital stock of subsidiaries;
(vii) limitations on dividends and other payment
restrictions affecting subsidiaries; and (viii)
restrictions on consolidations, mergers and sale of
assets.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
ABSENCE OF PUBLIC MARKET.......... There is no public market for the Exchange Notes, and
the Exchange Notes will not be listed on any securities
exchange. The Company has been advised by the Initial
Purchaser that, following consummation of the Exchange
Offer, the Initial Purchaser intends to make a market in
the Exchange Notes; however, any market making may be
discontinued at any time without notice. If an active
public market does not develop, the market price and
liquidity of the Exchange Notes may be adversely
affected. See 'Risk Factors.'
</TABLE>
For definitions of certain capitalized terms used herein, see 'Description of
the Senior Notes.'
RISK FACTORS
Prospective investors in the Exchange Notes should carefully consider the
matters set forth under "Risk Factors" beginning on page 12.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
Set forth in the following table are certain consolidated historical
financial data concerning the Company for each of the periods specified and
selected pro forma financial data for the twelve months ended December 28, 1996,
the six months ended June 29, 1996 and as of and for the six months ended June
28, 1997. The information as of and for each of the twelve months ended December
31, 1994, December 30, 1995 and December 28, 1996 is derived from the audited
consolidated financial statements of the Company for such periods. The Company's
consolidated financial statements as of December 30, 1995 and December 28, 1996
and for the twelve months ended December 31, 1994, December 30, 1995, and
December 28, 1996 have been audited by KPMG Peat Marwick LLP, independent
certified public accountants, as indicated in their report thereon which appears
elsewhere in this Prospectus. The financial data for the six months ended June
29, 1996 and as of and for the six months ended June 28, 1997 are derived from
the Company's unaudited consolidated financial statements and such statements
include all adjustments (consisting of normal recurring adjustments) considered
necessary in the opinion of management for fair presentation of the financial
position, results of operations and cash flows of the Company. The results for
any interim period are not necessarily indicative of the results that may be
expected for the full year. The summary pro forma financial data give pro forma
effect to the Refinancing (as defined herein) as if it had occurred on the first
day of the period presented with respect to statement of operations data, and as
of June 28, 1997 with respect to balance sheet data. The pro forma adjustments
are based upon available information and certain assumptions that management of
the Company believes are reasonable. The pro forma results of operations are not
necessarily indicative of the results of operations that would have been
achieved had the Refinancing been consummated at the beginning of the period
presented or that might be attained in the future. The following table should be
read in conjunction with "Use of Proceeds," "Pro Forma Financial Data,"
"Selected Historical and Pro Forma Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and related notes thereto (the
"Consolidated Financial Statements") appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
---------------------------------------- ----------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28, JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales..................................... $ 473,275 $ 483,581 $ 498,742 $ 274,939 $ 271,282
Gross profit.................................. 306,674 295,452 306,230 169,329 165,616
Operating expenses (1)........................ 166,799 195,457 194,184 114,753 108,650
Operating earnings............................ 129,694 82,286 99,200 54,576 56,966
Net earnings (loss) available to common
stockholders................................ $ 28,384 $ (5,161) $ 18,199 $ 11,470 $ 13,365
Ratio of earnings to fixed charges............ 1.7x 1.2x 1.5x 1.6x 1.7x
OTHER DATA:
EBITDA (2)(3)................................. $ 147,287 $ 108,491 $ 120,975 $ 65,316 $ 67,165
Depreciation and amortization (3)............. 17,593 26,205 21,775 10,740 10,199
Capital expenditures.......................... 8,503 12,395 9,740 4,644 6,017
Gross margin (4).............................. 64.8% 61.1% 61.4% 61.6% 61.0%
EBITDA margin (5)............................. 31.1% 22.4% 24.3% 23.8% 24.8%
SELECTED PRO FORMA DATA: (6)
Net earnings.................................. $ 17,032 -- $ 12,915
Cash interest expense (7)................................................. 64,367 -- 31,715
Ratio of EBITDA to cash interest expense.................................. 1.9x -- 2.1x
Ratio of earning to fixed charge (8)...................................... 1.5 -- 1.7
Ratio of net debt to EBITDA (9)........................................... 6.1
</TABLE>
<TABLE>
<CAPTION>
JUNE 28, 1997
------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28, AS
1994 1995 1996 ACTUAL ADJUSTED(10)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA (AT PERIOD END):
Working capital............................. $ 17,623 $ 28,637 $ 6,522 $ 30,993 $ 63,570
Total assets................................ 599,400 682,861 660,331 676,507 680,085
Total long-term debt (11)................... 875,700 790,050 739,700 745,200 759,433
Common stock and other stockholders'
equity.................................... (465,997) (300,976) (282,727) (269,294) (273,372)
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE)
10
<PAGE>
(NOTES FROM PRECEDING PAGE)
- ------------------------------
(1) Excludes amortization of intangibles and write-off of the unamortized
balance of certain intangible assets. See Note 3.
(2) EBITDA is defined as operating earnings plus depreciation and amortization.
EBITDA should not be considered as an alternative to operating earnings
(loss) or net income (loss) (as determined in accordance with generally
accepted accounting principles) as a measure of the Company's operating
performance or to net cash provided by operating, investing and financing
activities (as determined in accordance with generally accepted accounting
principles) as a measure of the Company's ability to meet cash needs. The
Company believes that EBITDA is a measure commonly reported and widely used
by investors and other interested parties as a measure of a company's
operating performance and debt servicing ability because it assists in
comparing performance on a consistent basis without regard to depreciation
and amortization, which can vary significantly depending upon accounting
methods (particularly when acquisitions are involved) or nonoperating
factors (such as historical cost). Accordingly, this information has been
disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies and of the
Company's debt servicing ability. However, EBITDA may not be comparable in
all instances to other similar types of measures used.
(3) The non-cash expense associated with the write-off of the unamortized
balance of certain intangible assets in 1995 totaling $6.4 million is
included in depreciation and amortization.
(4) Gross profit as a percentage of net sales for the period presented.
(5) EBITDA as a percentage of net sales for the period presented.
(6) Gives pro forma effect to the Refinancing as if it had occurred on the first
day of the period presented.
(7) Defined as total interest expense (less non-cash amortization of deferred
financing costs). Pro forma cash interest expense is calculated as follows:
<TABLE>
<CAPTION>
TWELVE
MONTHS ENDED SIX MONTHS ENDED
------------- ------------------------
DECEMBER 28, JUNE 29, JUNE 28,
1996 1996 1997
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Actual interest expense.................................................... $ 64,860 $ 32,962 $ 32,209
Less: Amortization of existing deferred financing costs............... (2,089) (1,009) (1,083)
------------- ----------- -----------
Actual cash interest expense............................................... 62,771 31,953 31,126
Less: Interest expense on debt refinanced............................. (30,633) (16,128) (15,328)
Add: Interest expense on Senior Notes................................ 13,313 6,656 6,656
Interest expense on the Credit Facilities....................... 18,916 10,212 9,261
------------- ----------- -----------
Pro forma cash interest expense................................. $ 64,367 $ 32,693 $ 31,715
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
Pro forma interest expense on the Credit Facilities is based upon the
applicable rate in effect during the periods indicated after giving effect
to the applicable interest margin.
(8) Earnings used in computing the ratios of earnings to fixed charges consist
of earnings from continuing operations before income taxes, plus fixed
charges. Fixed charges consist of interest on indebtedness, amortization of
deferred financing costs and discount on indebtedness, and one-third of
rental expense, which is deemed to be representative of the interest factor
of rental payments.
(9) Net debt is defined as total debt less cash and cash equivalents at June 28,
1997 on a pro forma basis and excludes obligations due to related party. See
"Description of Certain Indebtedness--Due to Related Party." EBITDA is for
the twelve months ended June 28, 1997.
(10) As adjusted for the Refinancing as if it had occurred on June 28, 1997.
(11) Includes current portion of long-term debt and excludes obligations due to
related party. See "Description of Certain Indebtedness--Due to Related
Party" and the Consolidated Financial Statements included elsewhere in this
Prospectus.
11
<PAGE>
RISK FACTORS
THE FOLLOWING FACTORS, AS WELL AS THE OTHER INFORMATION CONTAINED ELSEWHERE
IN THIS PROSPECTUS, SHOULD BE CAREFULLY CONSIDERED BEFORE INVESTING IN THE
EXCHANGE NOTES OFFERED HEREBY.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Initial Notes who do not exchange their Initial Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Initial Notes as set forth in the legend
thereon as a consequence of the issuance of the Initial Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Initial Notes may not be offered or sold unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. The Company does not intend to register the Initial Notes
under the Securities Act, other than in the limited circumstances contemplated
by the Registration Rights Agreement. In addition, any holder of Initial Notes
who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. To the extent that Initial Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered or tendered but
unaccepted Initial Notes could be adversely affected. See "The Exchange Offer"
and "Exchange Offer; Registration Rights."
HIGH LEVERAGE AND SUBSTANTIAL DEBT SERVICE REQUIREMENTS
Following the offering of the Initial Notes (the "Offering"), the Company
continues to be highly leveraged and have substantial debt service obligations.
As of June 28, 1997, on a pro forma basis, after giving effect to the
Refinancing, the Company's long-term debt would have been $836.3 million
including $78.4 million due to a related party and the Company's stockholders'
deficit would have been $273.4 million. See "Description of Certain
Indebtedness" and "Capitalization." The Company's consolidated pro forma ratio
of earnings to fixed charges for the twelve months ended December 28, 1996 would
have been 1.5. For the six months ended June 29, 1996 and June 28, 1997,
respectively, the Company's pro forma ratio of earnings to fixed charges would
have been 1.6 and 1.7, respectively. The Company may incur additional
indebtedness in the future, subject to certain limitations contained in the
instruments governing its indebtedness.
The degree to which the Company is leveraged could have important
consequences to holders of the Exchange Notes, including, but not limited to the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes may be impaired; (ii) a significant portion
of the Company's cash flow from operations must be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds available
to the Company for its operations; (iii) certain of the Company's borrowings are
and will continue to be at variable rates of interest, which could result in
higher interest expense in the event of increases in interest rates; and (iv)
such indebtedness contains, and any refinancing thereof likely will contain,
financial and restrictive covenants, the failure to comply with which may result
in an event of default which, if not cured or waived, could have a material
adverse effect on the Company. See "Description of Certain Indebtedness."
RISK OF PRINCIPAL REPAYMENT
The Company will have substantial principal repayment obligations prior to
the maturity of the Exchange Notes on July 15, 2004. In 2003, the Company will
be required to have fully repaid its borrowings under the Term Loan Agreement
among the Company, various financial institutions, DLJ Capital Funding, Inc.
("DLJ Capital Funding"), and the facility manager thereunder (the "Special Term
Loan") and the
12
<PAGE>
Credit Agreement among the Company, the several lenders from time to time party
thereto, DLJ Capital Funding and the agent thereunder (the "New Credit
Agreement"; and together with the Special Term Loan, the "Credit Facilities").
The Company's 9% Senior Subordinated Notes due 2003 (the "Senior Subordinated
Notes") will mature on December 15, 2003. See "Description of Certain
Indebtedness." The Company believes that it will generate sufficient cash flow
from operations to be able to make the scheduled payments of interest and
principal under the Credit Facilities and interest payments on the Senior
Subordinated Notes, the Initial Notes and the Exchange Notes offered hereby
(collectively, the "Notes"); however, the Company does not expect to generate
sufficient cash flow from operations to make the $360.0 million principal
payment due in 2003 on the Senior Subordinated Notes or the principal payment
due in 2004 on the Senior Notes. Accordingly, the Company will be required
either to refinance its obligations with respect to the Notes prior to maturity,
sell assets or raise equity capital to repay the principal amount of the Notes.
The Company's ability to make scheduled principal payments, refinance its
obligations with respect to its indebtedness, sell assets or raise equity
capital depends on its financial and operating performance, which, in turn, is
subject in part to prevailing economic conditions and to financial, business and
other factors beyond the Company's control. Although the Company's cash flow
from its operations and borrowings have been sufficient to meet its historical
debt service obligations, there can be no assurance that the Company's operating
results will continue to be sufficient or that future borrowing facilities will
be available for the payment or refinancing of the Company's indebtedness.
RISKS OF FAILURE TO REPAY INDEBTEDNESS
In the event the Company is unable to make required payments or otherwise
comply with the terms of its indebtedness, including borrowings under the Credit
Facilities and the Notes, the holders of such indebtedness could accelerate the
obligations of the Company thereunder, which could result in the Company's being
forced to seek protection under applicable bankruptcy laws or in an involuntary
bankruptcy proceeding being brought against the Company. Under such
circumstances, the holders of the Senior Notes may be adversely affected.
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
The Company conducts a portion of its operations through subsidiaries. As a
result of this holding company structure, the creditors of the Company,
including the holders of the Senior Notes, will effectively rank junior to all
creditors of the Company's subsidiaries which are not Guarantors, including
trade creditors. In the event of the dissolution, bankruptcy, liquidation or
reorganization of such a subsidiary, the holders of the Senior Notes will not
receive any amounts in respect of the Senior Notes until after the payment in
full of the claims of creditors of such subsidiary. As of June 28, 1997, on a
pro forma basis after giving effect to the Offering and the application of the
net proceeds therefrom, the aggregate amount of indebtedness and other
liabilities of the Company's subsidiaries to which the holders of the Senior
Notes would be effectively subordinated would have been approximately $4.7
million.
RESTRICTIVE COVENANTS
The Credit Facilities contain, and any refinancing thereof likely would
contain, a number of restrictive covenants. The New Credit Agreement includes
covenants restricting, among other things (i) incurrence of additional
indebtedness, (ii) dividends and restricted payments, (iii) creation of certain
liens, (iv) the use of proceeds from sales of assets and subsidiary stock, (v)
sale and leaseback transactions, (vi) transactions with affiliates and (vii)
certain mergers, consolidations and transfers of all or substantially all of the
assets of the Company. See "Description of Certain Indebtedness--Credit
Facilities." The Special Term Loan, the Indenture and the indenture relating to
the Senior Subordinated Notes (the "Senior Subordinated Indenture") also contain
numerous operating covenants including, among others, restrictions on the
ability of the Company to (i) incur additional indebtedness, (ii) create liens
or other encumbrances, (iii) make certain payments and investments and (iv) sell
or otherwise dispose of assets and merge or consolidate with
13
<PAGE>
another entity. See "Description of Certain Indebtedness--Senior Subordinated
Notes" and "Description of the Senior Notes--Certain Covenants." The New Credit
Agreement will include certain financial covenants, including (i) a minimum
ratio of EBITDA (as defined therein) less capital expenditures to interest
expense and (ii) a minimum ratio of Funded Debt (as defined therein) to EBITDA.
The agreement relating to the Special Term Loan will contain covenants similar
to those contained in the Indenture. A failure of the Company to comply with the
covenants contained in the Credit Facilities, the Indenture or the Senior
Subordinated Indenture could result in an event of default under the Credit
Facilities, the Indenture or the Senior Subordinated Indenture which could
permit acceleration of the obligations thereunder and acceleration of debt under
other instruments (including, but not limited to the Credit Facilities, the
Indenture or the Senior Subordinated Indenture, as applicable) that may contain
cross-acceleration or cross-default provisions. Other indebtedness of the
Company could contain financial and other covenants more restrictive than those
applicable to the Senior Notes.
CONTROL OF THE COMPANY
Haas Wheat holds approximately 40% of the outstanding shares of Common Stock
of the Company on a fully diluted basis and will likely continue to exercise
control over the business of the Company by virtue of its voting power with
respect to the election of directors and actions requiring stockholder approval.
See "Management" and "Security Ownership of Certain Beneficial Owners and
Management."
COMPETITION
The markets for the Company's products are highly competitive and are
characterized by the frequent introduction of new products. The Company believes
that the market for consumer products will continue to be highly competitive and
that the level of competition may intensify in the future as a result of higher
spending for advertising and promotion, new product initiatives and continued
activity in the private label sector. The Company's competitors consist of a
large number of domestic and foreign companies, a number of which have
significantly greater financial resources and less leverage than the Company.
The Company's major competitor in the tampon market is Tambrands, Inc.
("Tambrands"), the maker of TAMPAX. On July 21, 1997, Tambrands was acquired by
The Procter & Gamble Company ("Procter & Gamble"). See "Business--Competition."
MATERIAL CUSTOMERS
Certain customers are material to the business and operations of the
Company. For 1996 and the six months ended June 28, 1997, sales to Wal-Mart
represented approximately 18% and 23%, respectively, of the net sales of the
Company. Aggregate net sales to the Company's next three largest customers
represented approximately 12% in 1996 and 16% in the six months ended June 28,
1997. The loss of sales to Wal-Mart could have a material adverse effect on the
business and operations of the Company. See "Business--Customers and Backlog."
RISKS ATTENDANT TO ACQUISITION STRATEGY
The Company regularly considers the acquisition of other companies engaged
in the manufacture and sale of related products. At any given time, the Company
may be in various stages of considering such opportunities. Such acquisitions
are subject to the negotiation of definitive agreements and to conditions
typical in acquisition transactions, certain of which conditions may be beyond
the Company's control. There is no assurance that the Company will be able to
identify desirable acquisition candidates or will be successful in entering into
definitive agreements with respect to desirable acquisitions. Moreover, even if
definitive agreements are entered into, there is no assurance that any future
acquisition will thereafter be completed or, if completed, that the anticipated
benefits of the acquisition will be realized. The process of integrating
acquired operations into the Company's operations may result in unforeseen
operating difficulties, may absorb significant management attention and may
require significant financial resources
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that would otherwise be available for the ongoing development or expansion of
the Company's existing operations. Future acquisitions by the Company could
result in the incurrence of additional debt and contingent liabilities, which
could have a material adverse effect on the Company's financial condition and
results of operations.
TSS LITIGATION
Since 1980, the Company has been engaged in the defense of claims arising
from toxic shock syndrome ("TSS") cases relating to the use of tampons. During
the mid-1980's, there were approximately 200 pending claims at any one time
relating to PLAYTEX tampons. As of the end of June 1997, there were
approximately 12 pending claims, although additional claims may be made in the
future. Substantially all of the currently pending claims relate to incidents of
TSS since October 1985, for which period the Company maintained a self-insurance
program and carried no insurance with respect to such claims with third parties.
Effective December 1, 1995, the Company obtained insurance coverage with certain
limits in excess of the self-insured retention of $1.0 million per
occurrence/$4.0 million in the aggregate, on claims occurring on or after
December 1, 1995. Due to the inherent uncertainty of litigation, the Company may
be subject to adverse judgments which could be substantial in amount and would
not be covered by insurance. See "Business--Legal Proceedings."
FRAUDULENT CONVEYANCE RISK
In connection with the Offering, the Company incurred substantial
indebtedness under the Senior Notes.
The incurrence by the Company of indebtedness under the Senior Notes and the
incurrence by the Subsidiaries of indebtedness under the Guarantees may be
subject to review under federal and state fraudulent conveyance laws if a
bankruptcy, liquidation, reorganization or rehabilitation case or similar
proceeding is commenced or a lawsuit is commenced by or on behalf of unpaid
creditors of the Company or its Subsidiaries. Under these laws, if a court were
to find that, at the time the Senior Notes or the Guarantees were issued (a)
they were issued with the intent of hindering, delaying or defrauding current or
future creditors or (b)(i) the Company or one of its Subsidiaries received less
than reasonably equivalent value or fair consideration for issuing the Senior
Notes or the Guarantees, as the case may be, and (ii) the Company or one of its
Subsidiaries, as the case may be, (A) was insolvent or was rendered insolvent by
reason of the Offering, (B) was engaged, or about to engage, in a business or
transaction for which its assets constituted unreasonably small capital, (C)
intended to incur, or believed that it would incur, debts beyond its ability to
pay as such debts mature (as all of the foregoing terms are defined in or
interpreted under a relevant fraudulent conveyance laws) or (D) was a defendant
in an action for money damages or had a judgment for money damages docketed
against it (if, in either case, after final judgment the judgment is
unsatisfied), such court could avoid or subordinate the Senior Notes and the
Guarantees to presently existing and future indebtedness of the Company or one
of its Subsidiaries and take other action detrimental to the holders of the
Senior Notes and the Guarantees, including, under certain circumstances,
invalidating the Senior Notes and the Guarantees.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction which is being applied in any
such proceeding. Generally, however, the Company or a Subsidiary would be
considered insolvent if, at the time it incurred the indebtedness constituting
the Senior Notes or the Guarantees, either (i) the fair market value (or fair
saleable value) of its assets were less than the amount required to pay the
probable liability on its total existing debts and liabilities (including
contingent liabilities) as they become absolute and matured or (ii) it were
incurring debt beyond its ability to pay as such debt matures.
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POSSIBLE INABILITY TO REPURCHASE THE SENIOR NOTES UPON CHANGE OF CONTROL
Any Change of Control would constitute a default under the Credit
Facilities. Therefore, upon the occurrence of a Change of Control, the lenders
under the Credit Facilities would have the right to accelerate their loans and
the Company may be required to prepay all of its outstanding obligations under
the Credit Facilities. Moreover, upon the occurrence of any Change of Control,
the Company will be required to make a change of control offer under the
Company's Senior Subordinated Notes. See "Description of Certain
Indebtedness--Senior Subordinated Notes."
If a Change of Control Offer (as defined herein) is made, there can be no
assurance that the Company will have available funds sufficient to pay the
Change of Control Purchase Price (as defined herein) for any or all of the
Senior Notes that might be delivered by holders of the Senior Notes seeking to
accept the Change of Control Offer and, accordingly, none of the holders of the
Senior Notes may receive the Change of Control Purchase Price for their Senior
Notes. The failure of the Company to make or consummate the Change of Control
Offer or pay the Change of Control Purchase Price when due will give the Trustee
and the holders of the Senior Notes the rights described under "Description of
the Senior Notes--Events of Default."
ABSENCE OF A PUBLIC MARKET FOR EXCHANGE NOTES
The Exchange Notes will constitute a new issue of securities for which there
is no established trading market. The Company does not intend to list the
Exchange Notes on any national securities exchange or to seek the admission of
the Exchange Notes for quotation through the National Association of Securities
Dealers Automated Quotation System. Although the Initial Purchaser has advised
the Company that it currently intends to make a market in the Exchange Notes, it
is not obligated to do so and may discontinue such market making at any time
without notice. In addition, such market making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act, and may be limited
during the pendency of any Shelf Registration Statement. See "Exchange Offer;
Registration Rights." There can be no assurance as to the development or
liquidity of any market for the Exchange Notes, the ability of the holders of
the Exchange Notes to sell their Exchange Notes or the price at which the
holders would be able to sell their Exchange Notes. Future trading prices of the
Exchange Notes will depend on many factors, including, among other things,
prevailing interest rates, the Company's operating results and the market for
similar securities.
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THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $150 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Initial Notes properly tendered on or prior to the Expiration Date and
not withdrawn as permitted pursuant to the procedures described below. The
Exchange Offer is being made with respect to any and all of the Initial Notes.
As of the date of this Prospectus, $150 million aggregate principal amount
of the Initial Notes is outstanding. This Prospectus, together with the Letter
of Transmittal, is first being sent on or about , 1997, to all
holders of Initial Notes registered on the note register of the Company. The
Company's obligation to accept Initial Notes for exchange pursuant to the
Exchange Offer is subject to certain conditions set forth under "--Certain
Conditions to the Exchange Offer" below. The Company currently expects that each
of the conditions will be satisfied and that no waivers will be necessary.
PURPOSE OF THE EXCHANGE OFFER
The Initial Notes were issued on July 21, 1997 in a transaction exempt from
the registration requirements of the Securities Act. Accordingly, the Initial
Notes may not be reoffered, resold, or otherwise transferred unless so
registered or unless an applicable exemption from the registration and
prospectus delivery requirements of the Securities Act is available.
In connection with the issuance and sale of the Initial Notes, the Company
entered into the Registration Rights Agreement, which requires the Company to
file with the SEC a registration statement relating to the Exchange Offer not
later than 30 days after the date of issuance of the Initial Notes, and to use
its reasonable best efforts to cause the registration statement relating to the
Exchange Offer to become effective under the Securities Act not later than 120
days after the date of issuance of the Initial Notes and the Exchange Offer to
be consummated not later than 30 business days after the date of the
effectiveness of the Registration Statement (or use its reasonable best efforts
to cause to become effective a shelf registration statement with respect to
resales of the Initial Notes by the 120th calendar day after the date on which
the Company becomes obligated to file such shelf registration statement). A copy
of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement.
The Exchange Offer is being made by the Company to satisfy its obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Initial Notes are
registered on the note register of the Company or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Initial Notes are held of record by The Depository Trust Company.
Other than pursuant to the Registration Rights Agreement, the Company is not
required to file any registration statement to register any outstanding Initial
Notes. Holders of Initial Notes who do not tender their Initial Notes or whose
Initial Notes are tendered but not accepted would have to rely on exemptions to
registration requirements under the securities laws, including the Securities
Act, if they wish to sell their Initial Notes.
The Company is making the Exchange Offer in reliance on the position of the
staff of the SEC as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the staff would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Initial Notes may be offered for resale, resold
and otherwise transferred by a holder (other than any holder who is a
broker-dealer or an "affiliate" of the Company within the meaning of Rule 405 of
the Securities Act) without further compliance with the registration and
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prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Notes. See "--Resale of Exchange Notes." Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Initial Notes, where such Initial Notes were acquired by such broker dealer as a
result of market making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Initial Notes. The terms of the Exchange Notes are identical in all material
respects to the terms of the Initial Notes for which they may be exchanged
pursuant to this Exchange Offer, except that the Exchange Notes will generally
be freely transferable by holders thereof and will not be subject to any
covenant regarding registration under the Securities Act. The Exchange Notes
will evidence the same indebtedness as the Initial Notes and will be entitled to
the benefits of the Indenture. See "Description of the Senior Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the SEC with respect to whether the Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Initial Notes
may be offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on an interpretation by the staff of the SEC set
forth in a series of no-action letters issued to third parties, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Initial Notes may be offered for sale, resold and otherwise transferred by
any holder of such Exchange Notes (other than any such holder that is a
broker-dealer or is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and neither such holder nor any other
such person is engaging in or intends to engage in a distribution of such
Exchange Notes. Since the SEC has not considered the Exchange Offer in the
context of a no-action letter, there can be no assurance that the staff of the
SEC would make a similar determination with respect to the Exchange Offer. Any
holder who is an affiliate of the Company or who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes may be
deemed to have received restricted securities and cannot rely on such
interpretation by the staff of the SEC and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each holder, other than a broker-dealer, must acknowledge
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Initial Notes, where such Initial Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
Interest on the Exchange Notes will accrue from the last Interest Payment
Date on which interest was paid on the Initial Notes so surrendered, or if no
interest has been paid on such Initial Notes, from July 21, 1997.
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Tendering holders of the Initial Notes shall not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Initial Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on,
1997, unless the Company, has extended the period of time for which the Exchange
Offer is open (such date, as it may be extended, is referred to herein as the
"Expiration Date"). The Expiration Date will be at least 20 business days after
the commencement of the Exchange Offer in accordance with Rule 14e-1(a) under
the Exchange Act. The Company expressly reserves the right, at any time or from
time to time, in its sole discretion, to extend the period of time during which
the Exchange Offer is open, and thereby delay acceptance for exchange of any
Initial Notes, by giving oral or written notice to the exchange agent and by
timely public announcement no later than 9:00 a.m. New York City time, on the
next business day after the previously scheduled Expiration Date. During any
such extension, all Initial Notes previously scheduled Expiration Date. During
any such extension, all Initial Notes previously tendered will remain subject to
the Exchange Offer unless properly withdrawn.
The Company expressly reserves the right to (i) terminate or amend the
Exchange Offer and not to accept for exchange any Initial Notes not theretofore
accepted for exchange upon the occurrence of any of the events specified below
under "--Certain Conditions to the Exchange Offer" which have not been waived by
the Company and (ii) amend the terms of the Exchange Offer in any manner which,
in its good faith judgment, is advantageous to the holders of the Initial Notes,
whether before or after any tender of the Initial Notes. If any such termination
or amendment occurs, the Company will notify the Exchange Agent and will either
issue a press release or give oral or written notice to the holders of the
Initial Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time. Unless the Company
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date, the Company will, subject to the conditions described under
"--Certain Conditions to the Exchange Offer," exchange the Exchange Notes for
the Initial Notes on the Exchange Date.
PROCEDURES FOR TENDERING INITIAL NOTES
The tender to the Company of Initial Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Initial Notes may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Initial Notes being tendered and any required signature
guarantees and any other documents required by the Letter of Transmittal, to the
Exchange Agent at its address set forth below on or prior to the Expiration Date
(or complying with the procedure for book-entry transfer described below) or
(ii) complying with the guaranteed delivery procedures described below.
Any beneficial owner whose Initial Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
beneficial owner must, prior to
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completing and executing the Letter of Transmittal and delivering the Initial
Notes, either make appropriate arrangements to register ownership of the Initial
Notes in such beneficial owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
THE METHOD OF DELIVERY OF INITIAL NOTES, LETTERS OF TRANSMITTAL AND ALL OF
THE REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO INSURE TIMELY DELIVERY. NO INITIAL NOTES OR LETTERS OF TRANSMITTAL
SHOULD BE SENT TO THE COMPANY.
If tendered Initial Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Initial Notes are to be reissued) in the
name of the registered holder (which term, for the purposes described herein,
shall include any participant in The Depository Trust Company (the "Book-Entry
Transfer Facility") whose name appears on a security listing as the owner of
Initial Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Initial Notes must be endorsed or accompanied by
written instruments of transfer in form satisfactory to the Company and duly
executed by the registered holder, and the signature on the endorsement or
instrument of transfer must be guaranteed by a bank, broker, dealer, credit,
union, savings association, clearing agency or other institution (each an
"Eligible Institution") that is a member of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-L5 under the Exchange Act. If
the Exchange Notes and/or Initial Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note register
for the Initial Notes, the signature in the Letter of Transmittal must be
guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the
Initial Notes at the Book-Entry Transfer Facility for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Initial Notes by causing such
Book-Entry Transfer Facility to transfer such Initial Notes into the Exchange
Agent's account with respect to the Initial Notes in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. Although delivery
of Initial Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures.
If a holder desires to tender Initial Notes in the Exchange Offer and time
will not permit a Letter of Transmittal or Initial Notes to reach the Exchange
Agent before the Expiration Date or the procedure for book-entry transfer cannot
be completed on a timely basis, a tender may be effected if the Exchange Agent
has received at its address set forth below on or prior to the Expiration Date,
a letter, telegram or facsimile transmission (receipt confirmed by telephone and
an original delivered by guaranteed overnight courier) from an Eligible
Institution setting forth the name and address of the tendering holder, the
names in which the Initial Notes are registered and, if possible, the
certificate numbers of the Initial Notes to be tendered, and stating that the
tender is being made thereby and guaranteeing that within three business days
after the Expiration Date, the Initial Notes in proper form for transfer (or a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility), will be delivered by such
Eligible Institution together with a properly completed and duly executed Letter
of Transmittal (and any other required documents). Unless Initial Notes being
tendered by the above-described method are deposited with the Exchange Agent
within the time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required
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documents), the Company may, at its option, reject the tender. Copies of the
notice of guaranteed delivery ("Notice of Guaranteed Deliver") which may be used
by Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Initial Notes (or a confirmation of book-entry transfer of
such Initial Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange Agent.
Issuances of Exchange Notes in exchange for Initial Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other required documents)
and the tendered Initial Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Initial Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding on all parties. The Company reserves the absolute right to
reject any and all tenders of any particular Initial Notes not properly tendered
or not to accept any particular Initial Notes which acceptance might, in the
judgment of the Company or its counsel, be unlawful. The Company also reserves
the absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Initial Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Initial Notes in the Exchange Offer). The interpretation of
the terms and conditions of the Exchange Offer (including the Letter of
Transmittal and the instructions thereto) by the Company shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Initial Notes for exchange must be cured within such
reasonable period of time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Initial
Notes for exchange, nor shall any of them incur any liability for failure to
give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Initial Notes, such Initial Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
Initial Notes.
If the Letter of Transmittal or any Initial Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing , and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company, or if it is an affiliate, it
will comply with the registration and prospectus requirements of the Securities
Act to the extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Initial Notes where such Initial Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Initial Notes acquired directly from the Company) must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
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TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among others things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Initial Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Initial Notes to the Company and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Initial Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Initial Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Initial
Notes, and that, when the same are accepted for exchange, the Company will
acquire good and unencumbered title to the tendered Initial Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the exchange, assignment and
transfer of tendered Initial Notes or transfer ownership of such Initial Notes
on the account books maintained by a Book-Entry Transfer Facility. The
Transferor further agrees that acceptance of any tendered Initial Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Company of certain of its obligations under the
Registration Rights Agreement. All authority conferred by the Transferor will
survive the death or incapacity of the Transferor and every obligation of the
Transferor shall be binding upon the heirs, legal representatives, successors,
assigns, executors and administrators of such Transferor.
The Transferor certifies that it is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act and that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes. Each holder, other than
a broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in a distribution of Exchange Notes. Each Transferor which is a
broker-dealer receiving Exchange Notes for its own account must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Initial Notes where such Initial Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company will, for a period of one year after the
Exchange Date, make copies of this Prospectus available to any broker-dealer for
use in connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Initial Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsmile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Initial Notes to be withdrawn (the "Depositor"), (ii)
identify the Initial Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Initial Notes), (iii) specify the principal
amount of Initial Notes to be withdrawn, (iv) include a statement that such
holder is withdrawing his election to have such Initial Notes exchanged, (v) be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal by which such Initial Notes were tendered or as otherwise
described above (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of such Initial Notes into the name of the person
withdrawing the tender and (vi) specify the name in which any
22
<PAGE>
such Initial Notes are to be registered, if different from that of the
Depositor. The Exchange Agent will return the properly withdrawn Initial Notes
promptly following receipt of notice of withdrawal. If Initial Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Initial Notes or otherwise
comply with the Book-Entry Transfer Facility's procedure. All questions as to
the validity of notices of withdrawals, including time of receipt, will be
determined by the Company in its sole discretion and such determination will be
final and binding on all parties.
Any Initial Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Initial Notes
which have been tendered for exchange but which are not exchanged for any reason
will be returned to the holder thereof without cost to such holder (or, in the
case of Initial Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Initial Notes will be credited to an account
with such Book Entry Transfer Facility specified by the holder) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Initial Notes may be retendered by following one of
the procedures described under "--Procedures for Tendering Initial Notes" above
at any time on or prior to the Expiration Date.
ACCEPTANCE OF INITIAL NOTE FOR EXCHANGE; DELIVER OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly on the Exchange Date, all Initial Notes
properly tendered and will issue the Exchange Notes promptly after such
acceptance. See "--Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Initial Notes for exchange when, as and if the Company has given oral
or written notice thereof to the Exchange Agent.
For each Initial Note accepted for exchange, the holder of such Initial Note
will receive an Exchange Note having a principal amount equal to that of the
surrendered Initial Note.
In all cases, issuance of Exchange Notes for Initial Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Initial Notes or a timely
book-entry confirmation of such Initial Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal and all other required documents. If any tendered Initial
Notes are not accepted for any reason set forth in the terms and conditions of
the Exchange Offer or if Initial Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Initial Notes will be returned without expense to the tendering holder thereof
(or, in the case of Initial Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such non-exchanged Initial Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the Exchange Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company shall not be required to accept for exchange,
or to issue Exchange Notes in exchange for, any Initial Notes and may terminate
or amend the Exchange Offer (by oral or written notice to the Exchange Agent or
by a timely press release) if at any time before the acceptance of such Initial
Notes for exchange or the exchange of the Exchange Notes for such Initial Notes,
any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or have a
material adverse affect on the contemplated benefits of the Exchange
Offer to the Company; or
23
<PAGE>
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Initial Notes or the
Exchange Notes or that may materially impair the contemplated benefits of
the Exchange Offer to the Company; or
(c) any law, rule or regulation or applicable interpretations of the staff
of the SEC is issued or promulgated which, in the good faith
determination of the Company, do not permit the Company to effect the
Exchange Offer; or
(d) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deems necessary for the consummation of
the Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law statute, rule or
regulation) which, in the sole judgement of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
have a material adverse effect on the contemplated benefits of the
Exchange Offer to the Company; or
(f) there shall occur a change in the current interpretation by the staff of
the SEC which permits the Exchange Notes issued pursuant to the Exchange
Offer in exchange for Initial Notes to be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that
is a broker dealer or an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in the ordinary course of
such holders' business and such holders have no arrangement with any
person to participate in the distribution of such Exchange Notes; or
(g) there shall have occurred (i) any general suspension of, shortening of
hours for, or limitation on prices for, trading in securities on any
national securities exchange or in the over-the-counter market (whether
or not mandatory), (ii) any limitation by any governmental agency or
authority which may adversely affect the ability of the Company to
complete the transactions contemplated by the Exchange Offer, (iii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks by Federal or state authorities in the United States
(whether or not mandatory), (iv) a commencement of a war, armed
hostilities or other international or national crisis directly or
indirectly involving the United States, (v) any limitation (whether or
not mandatory) by any governmental authority on, or other event having a
reasonable likelihood of affecting, the extension of credit by banks or
other leading institutions in the United States, or (vi) in the case of
any of the foregoing existing at the time of the commencement of the
Exchange Offer, a material acceleration or worsening thereof.
The Company expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Initial Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Initial Notes). In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth above occur. Moreover, regardless of whether any
of such conditions has occurred, the Company may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the
Initial Notes.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from/time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right
24
<PAGE>
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time. If the Company waives or amends the foregoing
conditions, it will, if required by law, extend the Exchange Offer for a minimum
of five business days from the date that the Company first gives notice, by
public announcement or otherwise, of such waiver or amendment, if the Expiration
Date would otherwise occur within such five business-day period. Any
determination by the Company concerning the events described above will be final
and binding upon all parties.
In addition, the Company will not accept for exchange any Initial Notes
tendered, and no Exchange Notes will be issued in exchange for any such Initial
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. In any such event the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Initial Notes being tendered for exchange.
EXCHANGE AGENT
Marine Midland Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
BY HAND/OVERNIGHT COURIER: BY MAIL:
Marine Midland Bank (INSURED OR REGISTERED RECOMMENDED)
Attention: Corporate Trust Operations Marine Midland Bank
140 Broadway, Level A Attention: Corporate Trust Operations
New York, New York 10005-1180 140 Broadway, Level A
New York, New York 10005-1180
</TABLE>
BY FACSIMILE: (212) 658-2292
Attention: Frank Godino
Telephone: (212) 658-5931
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed
Delivery should be directed to the Exchange Agent at the address and telephone
number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH IN THE LETTER OF TRANSMITTAL,
OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER OTHER THAN THE
ONES SET FORTH IN THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID
DELIVERY.
SOLICITATION OF TENDERS, FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this and other related documents to the beneficial owners of the
Initial Notes and in handling or forwarding tenders for their customers.
25
<PAGE>
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $100,000 which includes fees and expenses of the Exchange Agent,
Trustee, registration fees, accounting, legal, printing and related fees and
expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company.
Neither the delivery of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the respective dates as of which
information is given herein. The Exchange Offer is not being made to (nor will
tenders be accepted from or on behalf of) holders of Initial Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. However, the
Company may, at its discretion, take such action as it may deem necessary to
make the Exchange Offer in any such jurisdiction and extend the Exchange Offer
to holders of Initial Notes in such jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Initial Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Initial Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Initial Notes tendered,
or if tendered Initial Notes are registered in the name of any person other than
the person signing the Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the exchange of Initial Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Initial
Notes as reflected in the Company's accounting records on the Exchange Date.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Initial Notes. Expenses incurred
in connection with the issuance of the Exchange Notes will be amortized over the
term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Initial Notes who do not tender their Initial Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Initial Notes as set forth in the legend
thereon. Initial Notes not exchanged pursuant to the Exchange Offer will
continue to remain outstanding in accordance with their terms. In general, the
Initial Notes may not be offered or sold unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Initial Notes under the
Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Initial
Notes should carefully consider whether to participate. Holders of Initial Notes
are urged to consult their financial and tax advisors in making their own
decision whether or not to tender their Initial Notes. See "Certain Federal
Income Tax Consequences."
26
<PAGE>
As a result of the making of, and upon acceptance for exchange of all
validly tendered Initial Notes pursuant to the terms of, this Exchange Offer,
the Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Initial Notes who do not tender their Initial Notes in the
Exchange Offer will continue to hold such Initial Notes and will be entitled to
all the rights and limitations applicable thereto under the Indenture, except
for any such rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange Offer. All untendered Initial Notes will continue to be subject to
the restrictions on transfer set forth in the legend thereon. To the extent that
Initial Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered Initial Notes could be adversely affected.
The Company may in the future seek to acquire, subject to the terms of the
Indenture, untendered Initial Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plan to acquire any Initial Notes which are not tendered in the
Exchange Offer.
RESALE OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on the position of the
staff of the SEC as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the staff would make a
similar determination with respect to the Exchange Offer as it has in such
interpretative letters to third parties. Based on these interpretations by the
staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Initial Notes may be offered for resale, resold
and otherwise transferred by a holder (other than any holder who is a
broker-dealer or an "affiliate" of the Company within the meaning of rule 405 of
the Securities Act) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Notes. However, any holder who is an
"affiliate" of the Company or who has an arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer, or any broker-dealer who purchased Initial Notes from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act (i) cannot rely on the applicable interpretations of the
staff and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act. A broker-dealer who holds Initial Notes that
were acquired for its own account as a result of market-making or other trading
activities may be deemed to be an "underwriter" within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of Exchange
Notes. Each such broker dealer that receives Exchange Notes for its own account
in exchange for Initial Notes, where such Initial Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Initial Notes acquired directly from the Company) must
acknowledge in the Letter of Transmittal that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by such broker-dealers in
connection with such resales. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the Exchange Notes for
offer or sale under the securities or blue sky laws of such jurisdictions as any
holder of the Exchange Notes reasonably requests. Such registration or
qualification may require the imposition of restrictions or conditions
(including suitability requirements for offerees or purchasers) in connection
with the offer or sale of any Exchange Notes.
27
<PAGE>
THE COMPANY
The Company is a leading manufacturer and marketer of a diversified line of
well recognized branded consumer products, including PLAYTEX tampons, PLAYTEX
infant care products, BANANA BOAT sun care products, PLAYTEX household latex
gloves and WOOLITE rug and upholstery cleaning products. In 1996, approximately
94% of the Company's net sales were derived from the sale of products in which
it holds the number one or two market share position. Since 1994, the Company
has leveraged its brand name recognition, stable market position and strong
distribution network to grow its Infant Care and Sun Care businesses, both of
which have experienced rapid growth in both market share and net sales. For the
twelve months ended June 28, 1997, the Company generated net sales and EBITDA of
$495.1 million and $122.8 million, respectively.
HISTORY AND BACKGROUND
The Playtex businesses were founded in 1932 under the name International
Latex Company and operated for many years prior to 1986 under the name
International Playtex, Inc. ("IPI"). In the mid-1950's, using the latex
technology developed for the manufacture of girdles, IPI began to market
household gloves, the first of many products to constitute the Family Products
division. Through the marketing of gloves, the addition of disposable nursers in
the mid-1960's and the acquisition in 1967 and subsequent expansion of its
tampon manufacturing business, Playtex established a major presence in the drug
store, supermarket and mass merchandise channels of distribution.
In 1986, IPI was the subject of a management leveraged buyout and, in 1988,
the Company, which was formed by certain management investors and The Thomas H.
Lee Company, acquired the Family Products business from Playtex Holdings, Inc.
("PHI"), the successor to IPI. Concurrently, Playtex Apparel, Inc. ("Apparel"),
which manufactured women's intimate apparel, was divested to a partnership owned
by operating management of that business. In November 1991, Apparel was sold to
Sara Lee Corporation ("Sara Lee"). There is no longer any corporate relationship
between the Company and Sara Lee or Apparel, except that the Company and Apparel
each own 50% of the stock of Playtex Marketing Corporation ("Playtex
Marketing"), which owns the PLAYTEX and LIVING trademarks and licenses them on a
royalty-free basis in perpetuity to the Company.
In December 1992, the Company acquired, for $5 million, a 22% common equity
interest in Banana Boat Holding Corporation ("BBH") in conjunction with the
acquisition by BBH's wholly-owned subsidiary, Sun Pharmaceuticals Corp. ("Sun"),
of the assets and certain liabilities of Sun Pharmaceuticals, Ltd. BBH was
controlled by Thomas H. Lee Equity Partners, L.P. and other employees and
affiliates of The Thomas H. Lee Company. Sun manufactured and marketed a line of
sun and skin care products in the United States and abroad under the BANANA BOAT
trademark. Concurrent with its acquisition of the equity interest in BBH, the
Company entered into a distribution agreement with Sun under which it
distributed BANANA BOAT sun and skin care products for Sun from November 1993 to
October 1995.
In October 1995, the Company acquired by merger all the remaining
outstanding common shares of BBH not previously owned by the Company (the "BBH
Acquisition") and terminated the distribution agreement. Beginning in November
1993, the Company had recognized 42.5% of the operating profits from the sale of
BANANA BOAT products, in accordance with the terms of the distribution agreement
between BBH and the Company. Following the BBH Acquisition, the Company's equity
ownership of BBH and its interest in the operating profits from the sale of
BANANA BOAT products increased to 100%. The net consideration expended in
connection with the BBH Acquisition included cash of approximately $40.4
million, the retirement of $27.1 million of BBH's long-term debt, the assumption
of BBH's working capital facility and the payment of accrued interest and
transaction fees of approximately $4.3 million. The BBH Acquisition was financed
with approximately $34.3 million of existing cash balances and advances under
the Company's acquisition revolving credit facility of $37.5 million. In March
1996, BBH was merged with and into Sun, with Sun being the surviving
corporation.
The Company's Common Stock is listed on The New York Stock Exchange under
the symbol "PYX."
The Company was incorporated in Delaware on September 1, 1988. The Company's
principal executive office is located at 300 Nyala Farms Road, Westport,
Connecticut 06880, and its telephone number is (203) 341-4000.
28
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds or incur an additional
indebtedness as a result of the issuance of the Exchange Notes pursuant to the
Exchange Offer.
The net proceeds to the Company from the Offering were approximately $145.0
million (after deducting discounts and commissions and estimated expenses of the
Offering). Concurrently with the consummation of the Offering, the Company
entered into the Credit Facilities. See "Description of Certain
Indebtedness--Credit Facilities." The Company used the proceeds from both the
Offering and the Credit Facilities to repay (the "Refinancing") all outstanding
indebtedness under the Credit Agreement, dated as of June 6, 1995, among the
Company, the several banks and other financial institutions from time to time
party thereto and The Chase Manhattan Bank (formerly known as Chemical Bank), as
agent, as amended, modified or supplemented (the "1995 Credit Agreement"). At
June 28, 1997, borrowings under the 1995 Credit Agreement consisted of $355.0
million under a term loan facility, $30.2 million under a working capital
facility and accrued interest of $4.2 million.
SOURCES AND USES OF FUNDS
The following is a summary of the estimated sources and uses of funds for
the Refinancing assuming it occurred on June 28, 1997.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
SOURCES: Credit Facilities(1).................................................................. $ 249,433
Senior Notes.......................................................................... 150,000
--------------
Total sources......................................................................... $ 399,433
--------------
--------------
USES: 1995 Credit Agreement(2).............................................................. $ 389,433
Refinancing fees and transaction expenses............................................. 10,000
--------------
Total uses............................................................................ $ 399,433
--------------
--------------
</TABLE>
- ------------------------
(1) Comprised of initial borrowings in the amount of $44,433 under the Revolving
Credit Facility, $150,000 of Special Term Loan borrowings and $55,000 of
Term A Loan borrowings (each as defined herein). See "Description of Certain
Indebtedness--Credit Facilities."
(2) Upon repayment of all indebtedness outstanding thereunder, the 1995 Credit
Agreement will be terminated.
At December 28, 1996, the weighted average variable interest rate on
borrowings under the 1995 Credit Agreement was 7.32%; the weighted average
variable interest rate on such borrowings for the twelve months ended December
28, 1996 was 7.35%. At June 28, 1997, the weighted average variable interest
rate on borrowings under the 1995 Credit Agreement was 7.58%.
29
<PAGE>
CAPITALIZATION
The following table sets forth the actual cash, current portion of long-term
debt and capitalization of the Company at June 28, 1997, and as adjusted to give
effect to the Refinancing. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Selected
Historical and Pro Forma Consolidated Financial Data." This table should be read
in conjunction with the Consolidated Financial Statements included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
JUNE 28, 1997
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
<CAPTION>
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Cash........................................................ $ 4,536 $ 4,536
------------ -----------
------------ -----------
Current portion of long-term debt......................... $ 27,500 $ 1,500
------------ -----------
------------ -----------
Long-Term Debt(1):
1995 Credit Agreement..................................... $ 357,700 $ --
Credit Facilities(2)...................................... -- 247,933
Senior Notes.............................................. -- 150,000
Senior Subordinated Notes................................. 360,000 360,000
------------ -----------
Total long-term debt, excluding current portion......... 717,700 757,933
------------ -----------
Common Stock ($0.01 par value; authorized 100,000,000
shares; issued and outstanding 50,921,540 shares)......... 509 509
Additional paid-in capital.................................. 424,505 424,505
Retained earnings (deficit)................................. (692,353) (696,431)
Foreign currency translation adjustment..................... (1,955) (1,955)
------------ -----------
Total stockholders' equity.............................. (269,294) (273,372)
------------ -----------
Total capitalization.................................... $ 448,406 $ 484,561
------------ -----------
------------ -----------
</TABLE>
- ------------------------
(1) Excludes current portion of long-term debt and obligations due to related
party. See "Description of Certain Indebtedness--Due to Related Party" and
the Consolidated Financial Statements included elsewhere in this Prospectus.
(2) At June 28, 1997, on a pro forma basis after giving effect to the
Refinancing, the Company would have had $69.1 million of undrawn
availability under the Credit Facilities.
30
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data of the Company
consist of the Pro Forma Consolidated Statements of Operations for the year
ended December 28, 1996 and the six months ended June 28, 1997, and the Pro
Forma Consolidated Balance Sheet as of June 28, 1997 adjusted to give effect to
the Refinancing, as if such transactions had occurred at the beginning of the
periods presented, with respect to the Pro Forma Consolidated Statement of
Operations and as of June 28, 1997, with respect to the Pro Forma Consolidated
Balance Sheet. See "Use of Proceeds." The Pro Forma Consolidated Statement of
Operations for the six months ended June 28, 1997 excludes the write-off of
deferred financing costs related to the 1995 Credit Agreement due to its
non-recurring nature.
The unaudited pro forma adjustments are based upon available information and
certain assumptions which management believes are reasonable and factually
supportable. The unaudited pro forma consolidated financial data that follows
does not purport to represent what the Company's consolidated results of
operations or consolidated financial position that would have been had the
transactions described above actually occurred on such date or at the beginning
of the relevant periods. In addition, the unaudited pro forma consolidated
financial data which follows does not purport to project the Company's
consolidated results of operations or consolidated financial position for the
current year or any future date or period.
31
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 28, 1997
-------------------------------------
<S> <C> <C> <C>
PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED
----------- ----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 4,536 $ 399,433(1) $ 4,536
(389,433)(2)
(10,000)(3)
Receivables, less allowance for doubtful accounts.................................. 87,357 87,357
Inventories........................................................................ 39,896 39,896
Current deferred taxes............................................................. 9,861 9,861
Other current assets............................................................... 2,472 2,472
----------- ----------- -----------
Total current assets............................................................. 144,122 -- 144,122
Net property, plant and equipment.................................................... 55,617 55,617
Intangible assets, net...............................................................
Goodwill........................................................................... 342,806 342,806
Patents, trademarks and other...................................................... 35,606 35,606
Deferred financing costs........................................................... 14,254 (6,422)(4) 17,832
10,000(3)
Due from related parties............................................................. 80,017 80,017
Other noncurrent assets.............................................................. 4,085 4,085
----------- ----------- -----------
Total assets................................................................... $ 676,507 $ 3,578 $ 680,085
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................... $ 21,286 $ -- $ 21,286
Accrued expenses................................................................... 53,390 (4,233)(2) 49,157
Income taxes payable............................................................... 10,953 (2,344)(4) 8,609
Current maturities of long-term debt............................................... 27,500 (27,500)(2) 1,500
1,500(1)
----------- ----------- -----------
Total current liablities......................................................... 113,129 (32,577) 80,552
Long-term debt:
1995 Credit Agreement.............................................................. 357,700 (357,700)(2) --
Senior Notes....................................................................... 150,000(1) 150,000
Special Term Loan.................................................................. 148,500(1) 148,500
Term A Loan........................................................................ 55,000(1) 55,000
Revolving Credit Facility.......................................................... 30,200(1) 44,433
10,000(1)
4,233(1)
9% Notes........................................................................... 360,000 360,000
----------- ----------- -----------
Total long-term debt............................................................. 717,700 40,233 757,933
Due to related party................................................................. 78,386 78,386
Other noncurrent liabilities......................................................... 13,440 13,440
Deferred income taxes................................................................ 23,146 23,146
----------- ----------- -----------
Total liabilities................................................................ 945,801 7,656 953,457
Stockholders' Equity:
Common Stock....................................................................... 509 509
Additional paid in capital......................................................... 424,505 424,505
Retained earnings (deficit)........................................................ (692,353) (4,078)(4) (696,431)
Foreign currency translation adjustment............................................ (1,955) (1,955)
----------- ----------- -----------
Total stockholders' equity....................................................... (269,294) (4,078) (273,372)
----------- ----------- -----------
Total liablities and stockholders' equity...................................... $ 676,507 $ 3,578 $ 680,085
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(SEE NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET ON FOLLOWING PAGE)
32
<PAGE>
(NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET ON PRECEDING PAGE)
- ------------------------
(1) To record receipt of proceeds from the Refinancing.
(2) To record the use of proceeds of the Refinancing to repay the Company's
existing indebtedness, including accrued interest under the 1995 Credit
Agreement.
(3) To record the use of proceeds of the Refinancing to pay the expenses
associated with the Refinancing.
(4) To reflect the extraordinary charge of $4,078 (net of the related tax
benefits of $2,344) related to the write off of the unamortized deferred
financing costs associated with the 1995 Credit Agreement.
33
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 28, 1996 JUNE 28, 1997
------------------------------------- -------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net Sales................................. $ 498,742 $ 498,742 $ 271,282 $ 271,282
Cost of sales............................. 192,512 192,512 105,666 105,666
----------- ----------- ----------- -----------
Gross profit............................ 306,230 306,230 165,616 165,616
----------- ----------- ----------- -----------
Operating expenses:
Advertising and sales promotion......... 119,380 119,380 64,006 64,006
Selling, distribution and research...... 56,776 56,776 28,974 28,974
Administrative.......................... 18,028 18,028 9,223 9,223
Amortization of intangibles............. 12,846 12,846 6,447 6,447
----------- ----------- ----------- -----------
Total operating expenses.............. 207,030 207,030 108,650 108,650
----------- ----------- ----------- -----------
Operating earnings.................... 99,200 99,200 56,966 56,966
$ (30,633)(5) $ (15,328) (8)
(1,306)(6) (653) (9)
Interest expense including related party 32,229(7) 15,917 (10
interest expense and income(1).......... 64,860 1,548(8) 66,698 32,209 774 (11 32,919
----------- ----------- ----------- ----------- ----------- -----------
Earnings from continuing operations
before income taxes................... 34,340 (1,838) 32,502 24,757 (710) 24,047
Income taxes.............................. 16,141 (671)(9) 15,470 11,392 (260) 12) 11,132
----------- ----------- ----------- ----------- ----------- -----------
Net earnings............................ $ 18,199 $ (1,167) $ 17,032 $ 13,365 $ (450) $ 12,915
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Cash interest expense(2).................. $ 62,771 $ 64,367 $ 31,126 $ 31,715
Ratio of EBITDA to cash interest
expense.................................. 1.9x 2.1x
Ratio of earnings to fixed charges(3)..... 1.5 1.7
Ratio of net debt to EBITDA(4)............ 6.1
</TABLE>
(SEE NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS ON
FOLLOWING PAGE)
34
<PAGE>
(NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS ON PRECEDING
PAGE)
- ------------------------------
(1) Included in interest expense is related party interest of $12,150 and $6,075
net of related party interest income of $12,003 and $6,001, respectively for
the twelve months ended December 28, 1996 and the six months ended June 28,
1997.
(2) Defined as total interest expense (less non-cash amortization of deferred
financing costs). Pro forma cash interest expenses is calculated as follows:
<TABLE>
<CAPTION>
TWELVE SIX MONTHS
MONTHS ENDED ENDED
DECEMBER 28, JUNE 28,
1996 1997
------------- -----------
<S> <C> <C>
Actual interest expense..................................................... $ 64,860 $ 32,209
Less: Amortization of existing deferred financing costs..................... (2,089) (1,083)
------------- -----------
Actual cash interest expense................................................ 62,771 31,126
Less: Interest expense on debt refinanced................................... (30,633) (15,328)
Add: Interest expense on Senior Notes....................................... 13,313 6,656
Interest expense on the Credit Facilities.............................. 18,916 9,261
------------- -----------
Pro forma cash interest expense........................................ $ 64,367 $ 31,715
------------- -----------
------------- -----------
</TABLE>
Pro forma interest expense on the Credit Facilities is based upon the
applicable rate in effect during the periods indicated after giving effect
to the applicable interest margin.
(3) Earnings used in computing the ratios of earnings to fixed charges consist
of earnings from continuing operations before income taxes, plus fixed
charges. Fixed charges consist of interest on indebtedness, amortization of
deferred financing costs and discount on indebtedness, and one-third of
rental expense, which is deemed to be representative of the interest factor
of rental payments.
(4) Net debt is defined as total debt less cash and cash equivalents at June 28,
1997 on a pro forma basis and excludes obligations due to related party.
EBITDA is for the twelve months ended June 28, 1997.
(5) To eliminate interest expense associated with the 1995 Credit Agreement.
(6) To eliminate amortization of deferred financing associated with the 1995
Credit Agreement.
(7) To record interest expense associated with the Refinancing.
(8) To record amortization of deferred financing associated with the
Refinancing.
(9) Represents the tax effect of adjustments specified in notes (5), (6), (7),
and (8) at statutory rates.
35
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Set forth in the following table are certain consolidated historical
financial data concerning the Company for each of the periods specified. The
information as of and for, each of the twelve months ended December 31, 1994,
December 30, 1995 and December 28, 1996 is derived from the audited consolidated
financial statements of the Company for such periods. The Company's consolidated
financial statements as of December 30, 1995 and December 28, 1996 and for the
twelve months ended December 31, 1994, December 30, 1995, and December 28, 1996
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as indicated in their report thereon which appears elsewhere in
this Prospectus. The Company's audited financial statements for the twelve
months ended December 26, 1992 and December 25, 1993 are not included in this
Prospectus. The financial data as of and for the six months ended June 29, 1996
and the six months ended June 28, 1997 are derived from the Company's unaudited
consolidated financial statements incorporated by reference herein, and such
statements include all adjustments (consisting of normal recurring adjustments)
considered necessary in the opinion of management for fair presentation of the
financial position, results of operations and cash flows of the Company. The
results for any interim period are not necessarily indicative of the results
that may be expected for the full year. The following table should be read in
conjunction with "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements appearing elsewhere in this Prospectus or incorporated by reference
herein.
36
<PAGE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
------------------------------------------------------------------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, DECEMBER 28, JUNE 29, JUNE 28,
1992 1993 1994 1995(8) 1996(8) 1996 1997
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $384,486 $ 409,858 $473,275 $483,581 $498,742 $274,939 $ 271,282
Cost of sales................. 126,549 136,722 166,601 188,129 192,512 105,610 105,666
------------ ------------ ------------ ------------ ------------ -------- ---------
Gross profit................ 257,937 273,136 306,674 295,452 306,230 169,329 165,616
------------ ------------ ------------ ------------ ------------ -------- ---------
Operating expenses:
Advertising and sales
promotion................. 88,750 87,446 98,999 117,581 119,380 71,602 64,006
Selling, distribution and
research.................. 36,486 41,526 51,628 54,251 56,776 28,245 28,974
Administrative.............. 13,862 14,862 16,172 23,625 18,028 8,504 9,223
Amortization of
intangibles............... 14,981 14,529 10,181 11,268 12,846 6,402 6,447
Write-off of intangible
assets.................... -- 121,620 -- 6,441 -- -- --
------------ ------------ ------------ ------------ ------------ -------- ---------
Total operating
expenses................ 154,079 279,983 176,980 213,166 207,030 114,753 108,650
------------ ------------ ------------ ------------ ------------ -------- ---------
Operating earnings
(loss).................. 103,858 (6,847) 129,694 82,286 99,200 54,576 56,966
Interest expense including
related party interest
expense and income (1)...... 114,016 115,949 76,153 71,361 64,860 32,962 32,209
------------ ------------ ------------ ------------ ------------ -------- ---------
Earnings (loss) from
continuing operations
before income taxes and
cumulative effect of
accounting changes and
extraordinary loss...... (10,158) (122,796) 53,541 10,925 34,340 21,614 24,757
Income taxes.................. 5,100 2,049 23,994 8,151 16,141 10,144 11,392
------------ ------------ ------------ ------------ ------------ -------- ---------
Earnings (loss) before
cumulative effect of
accounting changes and
extraordinary loss...... (15,258) (124,845) 29,547 2,774 18,199 11,470 13,365
Cumulative effect of
accounting changes net of
$693 income tax benefit..... -- 923 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ -------- ---------
Earnings (loss) before
extraordinary loss...... (15,258) (123,922) 29,547 2,774 18,199 11,470 13,365
Extraordinary loss on early
extinguishment of debt, net
of $25,430 and $5,180 tax
benefit for 1993 and 1995,
respectively................ -- (39,375) -- (7,935) -- -- --
------------ ------------ ------------ ------------ ------------ -------- ---------
Net earnings (loss)....... (15,258) (163,297) 29,547 (5,161) 18,199 11,470 13,365
Preferred dividend
requirements................ (11,163) (12,810) (1,163) -- -- -- --
------------ ------------ ------------ ------------ ------------ -------- ---------
Net earnings (loss)
available to common
stockholders............ $(26,421) $(176,107) $ 28,384 $ (5,161) $ 18,199 $ 11,470 $ 13,365
------------ ------------ ------------ ------------ ------------ -------- ---------
------------ ------------ ------------ ------------ ------------ -------- ---------
Earnings (loss) per share
after preferred dividend
requirements (primary and
fully diluted):
Before cumulative effect of
accounting change and
extraordinary loss........ $ (2.44) $ (12.67) $ 0.97 $ 0.07 $ 0.36 $ 0.23 $ 0.26
Before extraordinary loss... $ (2.44) $ (12.58) $ 0.97 $ 0.07 $ 0.36 $ 0.23 $ 0.26
Net earnings (loss)......... $ (2.44) $ (12.67) $ 0.97 $ (0.12) $ 0.36 $ 0.23 $ 0.26
Weighted average common shares
outstanding................. 10,845 10,867 29,212 42,309 50,833 50,881 50,910
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (2)(3)................. $124,565 $ 136,540 $147,287 $108,491 $120,975 $ 65,316 $ 67,165
Depreciation and amortization
(3)......................... 20,707 143,387 17,593 26,205 21,775 10,740 10,199
Capital expenditures.......... 9,818 6,490 8,503 12,395 9,740 4,644 6,017
Gross margin (4).............. 67.1% 66.6% 64.8% 61.1% 61.4% 61.6% 61.0%
EBITDA margin (5)............. 32.4% 33.3% 31.1% 22.4% 24.3% 23.8% 24.8%
Ratio of earnings to fixed
charges (6)................. -- -- 1.7x 1.2x 1.5x 1.6x 1.7x
BALANCE SHEET DATA (AT PERIOD
END):
Working capital............... $ 1,372 $ (24,632) $ 17,623 $ 28,637 $ 6,522 $ 31,659 $ 30,993
Total assets.................. 716,083 588,457 599,400 682,861 660,331 694,135 676,507
Total long-term debt (7)...... 930,032 915,413 875,700 790,050 739,700 775,000 745,200
Redeemable preferred stocks... 124,834 139,644 -- -- -- -- --
Common stock and other
stockholders' equity........ (544,917) (723,408) (465,997) (300,976) (282,727) (289,455) (269,294)
</TABLE>
(SEE NOTES ON FOLLOWING PAGE)
37
<PAGE>
(NOTES FROM PRECEDING PAGE)
- ------------------------------
(1) Included in interest expense is related party interest expense of $9,167,
$10,587, $12,150, $12,150, and $12,150 net of related party interest income
of $9,132, $10,502, $12,003, $12,003, and $12,003, respectively, for the
twelve months ended December 26, 1992, December 25, 1993, December 31, 1994,
December 30, 1995 and December 28, 1996 and $6,075 in related party interest
expense and $6,001 in related party interest income for the six months ended
June 29, 1996 and June 28, 1997.
(2) EBITDA is defined as operating earnings, plus depreciation and amortization.
EBITDA should not be considered as an alternative to operating earnings
(loss) or net income (loss) (as determined in accordance with generally
accepted accounting principles) as a measure of the Company's operating
performance or to net cash provided by operating, investing and financing
activities (as determined in accordance with generally accepted accounting
principles) as a measure of the Company's ability to meet cash needs. The
Company believes that EBITDA is a measure commonly reported and widely used
by investors and other interested parties as a measure of a company's
operating performance and debt servicing ability because it assists in
comparing performance on a consistent basis without regard to depreciation
and amortization, which can vary significantly depending upon accounting
methods (particularly when acquisitions are involved) or nonoperating
factors (such as historical cost). Accordingly, this information has been
disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies and of the
Company's debt servicing ability. However, EBITDA may not be comparable in
all instances to other similar types of measures used.
(3) The non-cash expense associated with the write-off of the unamortized
balances of certain intangible assets of $121,620 and $6,441 in 1993 and
1995, respectively, is included in depreciation and amortization.
(4) Gross profit as a percentage of net sales for the period presented.
(5) EBITDA as a percentage of net sales for the period presented.
(6) Earnings used in computing the ratios of earnings to fixed charges consist
of earnings (loss) from continuing operations before income taxes, plus
fixed charges. Fixed charges consist of interest on indebtedness,
amortization of deferred financing costs and discount on indebtedness, and
one-third of rental expense, which is deemed to be representative of the
interest factor of rental payments. For the twelve months ended December 26,
1992 and December 25, 1993, earnings were inadequate to cover fixed charges
by $10.2 million and $122.8 million, respectively. The ratio of earnings to
fixed charges and preferred dividends is not presented as that ratio has no
continuing relevancy. For the twelve months ended December 26, 1992 and
December 25, 1993 earnings were inadequate to cover fixed charges and
preferred dividends by $21.3 million and $135.6 million, respectively.
(7) Includes current portion of long-term debt and excludes obligations due to
related party. See "Description of Certain Indebtedness--Due to Related
Party" and the Consolidated Financial Statements included elsewhere in this
Prospectus.
(8) In 1995 and 1996, respectively, $1.4 and $10.3 million of additional net
sales were added as a result of the October 31, 1995 acquisition of the
remaining portion of Banana Boat Holdings Corporation not previously owned
by Playtex.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements included elsewhere in this Prospectus or incorporated by
reference herein.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 28, 1997 VERSUS SIX MONTHS ENDED JUNE 29, 1996
NET SALES. Net sales for the six months ended June 28, 1997 decreased $3.7
million, or 1%, to $271.3 from $274.9 million for the same period in fiscal
1996. Net sales of the Company's Feminine Care products were down $24.7 million,
or 22%, versus the first six months of 1996. These results reflect: (i) heavy
promotional activities in the first half of 1996 which were not repeated in the
current period and (ii) a strategic decision by management to reduce trade
inventory levels, which had increased due to heavy trade promotional activity in
prior periods. Net sales of the Company's Sun Care products increased $17.8
million, or 28%, for the six month period while net sales of Infant Care
products increased $9.0 million, or 17%, over the same period in 1996. This
growth in both Sun Care and Infant Care is due to (i) successful new product
launches, (ii) distribution gains, (iii) continued market share gains, and (iv)
continued category growth. Additionally, versus the same period in 1996,
Household Product net sales decreased $2.4 million, or 8%, due in part to a
change in pricing strategy for PLAYTEX gloves and the introduction of a new
competitor in the carpet cleaning products business. Hair Care net sales, which
represents 4% of the Company's total net sales, decreased 21% versus the first
half of 1996.
GROSS PROFIT. Gross profit of $165.6 million for the first six months of
fiscal 1997 decreased by $3.7 million, or 2%, from the corresponding period in
1996. Period to period, gross margin decreased 0.6% to 61.0%. This decrease was
attributable primarily to the mix of products sold.
OPERATING EARNINGS. Operating earnings for the six months ended June 28,
1997 or $57.0 million were $2.4 million, or 4%, higher than for the comparable
period in fiscal 1996. The increase in operating earnings was due primarily to a
29% decrease in trade spending offset in part by lower gross margins, increased
consumer and media spending, and marginally higher overhead costs.
INTEREST EXPENSE. Interest expense of $32.2 million decreased $0.8 million,
or 2%, as a result of marginal reductions in the average long-term debt position
and interest rates.
NET EARNINGS. Net earnings of $13.4 million for the first six months of
fiscal 1997 were $1.9 million, or 17% higher than the same period in fiscal
1996.
TWELVE MONTHS ENDED DECEMBER 28, 1996 COMPARED TO TWELVE MONTHS ENDED DECEMBER
30, 1995
NET SALES. Net sales in 1996 increased $15.1 million, or 3%, to $498.7
million from $483.6 million in 1995. Feminine Care net sales decreased $18.1
million, or 7%, compared to 1995. The Infant Care, Sun Care and Household
Products lines reported gains in net sales of 25%, 46% and 6%, respectively,
compared to 1995.
Net sales for the Feminine Care business were $225.5 million for 1996
compared to $243.6 million in 1995. These results reflect (i) the rigorous
competitive environment in the tampon category, particularly in the first half
of the year; and (ii) a reduction in the level of inventories carried by
retailers during the year. Although shipments to retailers declined 7% during
the year, retail sales to consumers in units decreased only 1%, and the
Company's unit market share was stable at 23% for the year.
39
<PAGE>
Infant Care net sales increased $22.0 million, or 25%, to $109.5 million in
1996 from $87.5 million in 1995. The increase was due primarily to the continued
growth of the 6-ounce SPILL-PROOF cup and the successful introductions in 1996
of the 9-ounce SPILL-PROOF cup and the QUICKSTRAW bottle.
Sun Care net sales increased $23.0 million, or 46%, to $73.3 million in 1996
from $50.3 million in 1995. This increase resulted from an increase in market
share for the year from 18% to 19%, category growth of 2% compared to 1995 and
the addition of $10.3 million of revenues as a result of the BBH Acquisition.
Household Products net sales increased $3.2 million, or 6%, to $60.5 million
in 1996 from $57.3 million in 1995. WOOLITE'S net sales increased $4.1 million,
or 17%, to $27.8 million in 1996 compared to $23.7 million in 1995, while Glove
net sales decreased $0.8 million, or 2%, to $32.8 million compared to $33.6
million in the prior year. The increase in WOOLITE net sales was attributable to
the complete integration of this business after its acquisition in early 1995.
Gloves net sales declined primarily due to a change in pricing strategy which
resulted in lower reported revenue, more than offset by lower trade spending.
The Company's market share in the household latex glove category grew by three
percentage points in 1996 from 35% to 38%.
Hair Care net sales declined by $14.5 million, or 37%, to $25.2 million,
compared to $39.7 million in 1995. Much of this decline was attributable to the
strategic decision on the part of the Company to significantly reduce
ineffective and unprofitable trade spending associated with the JHIRMACK brand.
For the year, Hair Care accounted for 5% of total net sales.
GROSS PROFIT. Gross profit increased $10.8 million, or 4%, to $306.2
million for the 1996 year compared to $295.4 million for 1995. For the year,
gross margin was 61.4% of net sales compared to 61.1% of net sales in 1995. The
increase in margin was due, in part, to $3.4 million of pre-tax charges having
been included in the 1995 cost of sales related to the BBH Acquisition,
partially offset by a shift in product sales mix to lower margin goods.
OPERATING EARNINGS. Operating earnings increased $16.9 million, or 21%, to
$99.2 million for the 1996 year compared to $82.3 million for the prior year.
This increase was due to the margin impact of the increased net sales described
above and the fact that $15.5 million of one time pre-tax charges were included
in the 1995 results. These one time charges consisted of $3.4 million in the
cost of sales as previously described, $5.7 million (included in administrative
expenses) to implement certain organizational changes arising from management's
plan to streamline and strengthen the Company, and $6.4 million to write-off
intangible assets associated with the SMILETOTE business.
Advertising and promotional expenses increased by $1.8 million, or 2%, in
1996 compared to 1995. As part of its consumer oriented marketing strategy, the
Company invested more heavily in advertising and consumer spending and focused
less on trade spending. Excluding the impact of the 1995 one time items, the
remaining operating expenses increased $4.2 million, or 5%, compared to 1995,
mainly as a result of the BBH Acquisition in the fourth quarter of 1995 and a
continued focus on new product development.
INTEREST EXPENSE. The decrease in interest expense of $6.5 million for the
1996 year resulted from both lower debt levels and lower interest rates. See
Note 7 of the Consolidated Financial Statements incorporated by reference
herein.
NET EARNINGS. As a result of the factors noted above, net earnings were
$18.2 million in 1996 compared to a net loss of $5.2 million in 1995.
TWELVE MONTHS ENDED DECEMBER 30, 1995 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1994
NET SALES. Net sales in 1995 increased $10.3 million, or 2%, to $483.6
million from $473.3 million in 1994. Feminine Care net sales were $243.6 million
compared to $257.1 million in 1994. This decline in net sales reflects a decline
in the Company's market share partially offset by market growth. Infant Care,
Sun
40
<PAGE>
Care and PLAYTEX household latex gloves reported growth in net sales versus 1994
of 12%, 3% and 3%, respectively. The acquisition of WOOLITE in the first quarter
of 1995 contributed $23.7 million in additional sales.
Infant Care net sales for 1995 increased to $87.5 million or 12% from $77.9
million in 1994. The increase in net sales was due primarily to increased cup
volume associated with the success of the 6-ounce PLAYTEX SPILL-PROOF CUP, which
was introduced in the fourth quarter of 1993, and a full year's impact of the
SMILETOTE line of cups and bottles that was acquired in July of 1994.
Sun Care net sales for 1995 were $50.3 million, or 3% above the 1994 total
of $48.9 million. The increase in net sales was the result of an increase in
market share for the year from approximately 16% in 1994 to 18% in 1995,
category growth (based on dollar sales) of 9% compared to 1994, and $1.4 million
of additional revenues as a result of the BBH Acquisition. Partially offsetting
these net sales gains were higher than expected product returns related to the
1994 sun care season.
Glove net sales for 1995 increased $1.1 million or 3% to $33.6 million from
$32.5 million in 1994. This gain was attributable primarily to an estimated 4%
growth (based on dollar sales) in the category combined with a 3% increase in
market share to 35%. Partially offsetting these increases was a $1.6 million
decrease in net sales associated with the discontinuation of the DURAMITT
product line. Excluding DURAMITT, net sales for gloves increased 9% over 1994.
Hair Care net sales in 1995 declined by $11.6 million, or 23%, to $39.7
million from $51.4 million in 1994. Hair Care represented 8% of net sales in
1995.
GROSS PROFIT. Gross profit decreased $11.2 million, or 4% to $295.5 million
from $306.7 million in 1994. For the year, gross margin was 61.1% of net sales
compared to 64.8% of net sales in 1994. The decrease in margin was due to $3.4
million of one time charges incurred in the fourth quarter associated with
BANANA BOAT and the acquisition of BBH, a change in product mix to lower margin
products and higher product costs, including increased costs for key materials
such as latex, resin, rayon and corrugate.
OPERATING EARNINGS. Operating earnings declined $47.4 million, or 37%, to
$82.3 million from $129.7 million in 1994. $15.5 million of pre-tax one-time
charges, previously described contributed to this decline.
In line with the Company's strategy to more aggressively focus on the
consumer, advertising and promotion expenses were up $18.6 million, or 19%,
compared to 1994. Selling, distribution and research costs increased $2.6
million over 1994, mainly as a result of the acquisitions of WOOLITE in the
first quarter of 1995 and BBH in the fourth quarter of 1995.
WRITE-OFF OF SMILETOTE INTANGIBLE ASSETS. During the fourth quarter of 1995
and in connection with certain strategic decisions regarding the SMILETOTE
product line, management determined that the unamortized intangible assets
associated with SMILETOTE, totaling $6.4 million, were permanently impaired. See
Note 11 to the Consolidated Financial Statements included elsewhere in this
Prospectus.
INTEREST EXPENSE. Interest expense decreased $4.8 million for the twelve
months ended December 30, 1995 to $71.4 million from $76.2 million in 1994. This
decrease was attributable to lower debt levels as a result of the $180 million
equity infusion from partnerships managed by Haas Wheat and lower interest rates
associated with the 1995 Credit Agreement. See Note 7 to the Consolidated
Financial Statements included elsewhere in this Prospectus.
NET EARNINGS. As a result of the above factors, net loss was $5.2 million
for 1995 compared to net earnings available to common stockholders of $28.4
million for the same period in 1994.
FINANCIAL CONDITION AND LIQUIDITY
At June 28, 1997, the Company's working capital (current assets net of
current liabilities) increased by $24.5 million to $31.0 million from $6.5
million at December 28, 1996. The increase resulted from (i) an
41
<PAGE>
increase in accounts receivable of $23.4 million, principally due to an increase
in sales in the second quarter of 1997 when compared with the fourth quarter of
1996 and the seasonal nature of Sun Care product sales with extended credit
terms, (ii) an increase in inventory of $2.3 million, due primarily to the build
of the seasonal Sun Care inventory and (iii) a decline in accounts payable of
$14.8 million. These working capital increases were partly offset by (i) a $5.4
million increase in income taxes payable, primarily the result of the difference
in earnings in the second quarter of 1997 versus the fourth quarter of 1996,
(ii) a $4.1 million increase in accrued expense due primarily to the seasonal
increase in returns provision for the Sun Care products and (iii) a $2.5 million
increase in the current portion of long term debt. All other working capital
components decreased by a net $4.0 million.
At December 28, 1996, the Company's working capital decreased to $6.5
million from $28.6 million at December 30, 1995. This decrease was in line with
management's intention to reduce the levels of working capital required to
manage the business. These efforts contributed to the generation of
approximately $50.0 million of free cash flow and a corresponding reduction in
long-term debt during 1996.
The Company's businesses, with the exception of Sun Care, generally have not
been seasonal. Sun Care product sales are highly seasonal, with 85 to 90 percent
of sales occurring in the first six months of the year. This seasonality
requires increased inventory to support the selling season and the extended
credit terms which are typical in the sun care industry result in higher
receivables for the Company.
At June 28, 1997, long-term debt (including current portion but excluding
obligations due to related party) was $745.2 million, compared to $739.7 million
at December 28, 1996 and $775.0 million at June 29, 1996. The net increase in
long-term borrowings since December 28, 1996 was the result of the increased
working capital requirements of the seasonal Sun Care business offset in part by
a $12.5 million principal payment on the term loan facility. Because of the
seasonal nature of the sun care industry, working capital borrowings are at
their peak in the months of March through June.
On a pro forma basis, at June 28, 1997, long-term debt (including current
portion but excluding obligations due to related party) would have been $759.4
million. The Company used the $145.0 million in net proceeds from the sale of
the Initial Notes, together with the proceeds of borrowings under the Credit
Facilities, to repay all indebtedness outstanding under, and terminate the 1995
Credit Agreement.
The Credit Facilities consist of (i) $150 million of borrowings under the
Special Term Loan and (ii) $170 million of credit availability under the New
Credit Agreement, which consists of a $115 million revolving credit facility
(the "Revolving Credit Facility") and a $55 million tranche A term loan facility
(the "Term A Loan"). The Special Term Loan, the Revolving Credit Facility and
the Term A Loan all have a final maturity in 2003, with varying principal
repayment and commitment reduction requirements prior thereto. The Special Term
Loan bears interest at a rate equal to the sum of a LIBOR rate plus 1.5%.
Amounts borrowed under the New Credit Agreement bear interest, at the option of
the Company, at either (i) the alternative base rate of the administrative agent
thereunder or (ii) a reserve adjusted LIBOR rate, plus a margin which will vary
depending on the ratio of Funded Debt (as defined therein) to EBITDA (as defined
therein). See "Use of Proceeds" and "Description of Certain Indebtedness--Credit
Facilities." Commitments under the Revolving Credit Facility are automatically
and permanently reduced by (i) $5.0 million on December 15, 2000 and June 15,
2001, (ii) $7.0 million on December 15, 2001 and June 15, 2002, and (iii) $8.0
million on December 15, 2002 and June 15, 2003. At June 28, 1997, on a pro forma
basis after giving effect to the Refinancing, the Company had $69.1 million of
undrawn availability under the Credit Facilities. See "Description of Certain
Indebtedness--Credit Facilities."
Prior to the Refinancing, the Company had entered into interest rate
protection agreements which hedged substantially all of the Company's long-term
bank debt under the 1995 Credit Agreement. These agreements were terminated in
connection with the Refinancing.
The Credit Facilities require the Company to meet certain financial
covenants and ratios and also include conditions or restrictions on new
indebtedness and liens, major acquisitions or mergers, capital
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expenditures and disposition of assets, certain dividends and other
distributions, and prepayment and modification of indebtedness or equity
capitalization. The Senior Subordinated Notes also contain restrictions and
requirements with regard to similar matters. Under the terms of the Credit
Facilities and the Senior Subordinated Notes, payment of cash dividends on the
common stock of the Company is restricted.
Capital expenditures for equipment and facility improvements were $4.6
million for the six months ended June 29, 1996 compared to $6.0 million for the
comparable period in 1997 and were $8.5 million, $12.4 million and $9.7 million
for the twelve months ended December 31, 1994, December 30, 1995 and December
28, 1996, respectively. These expenditures were used primarily to upgrade
production equipment and maintain facilities in the ordinary course of business.
Capital expenditures for 1997 are anticipated to be approximately $13.0 million,
mostly for production related equipment and facility improvements and for
projects consistent with those of the prior years.
The Company believes that it will generate sufficient cash flow from
operations to be able to make the scheduled payments of interest and principal
under the Credit Facilities and interest payments on the Notes; however, the
Company does not expect to generate sufficient cash flow from operations to make
the $360.0 million principal payment due in 2003 on the Senior Subordinated
Notes or the principal payment due in 2004 on the Senior Notes. Accordingly, the
Company will be required either to refinance its obligations with respect to the
Notes prior to maturity, sell assets or raise equity capital to repay the
principal amount of the Notes. The Company's ability to make scheduled principal
payments, to refinance its obligations with respect to its indebtedness, to sell
assets or to raise equity capital depends on its financial and operating
performance, which, in turn, is subject in part to prevailing economic
conditions and to financial, business and other factors beyond its control.
Although the Company's cash flow from its operations and borrowings have been
sufficient to meet its historical debt service obligations, there can be no
assurance that the Company's operating results will continue to be sufficient or
that future borrowing facilities will be available for the payment or
refinancing of the Company's indebtedness.
Inflation in the United States and Canada has not had a significant effect
on the Company's business or operations during recent periods.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS No. 128 simplifies the earnings per share ("EPS") computation and
replaces the presentation of primary EPS with a presentation of basic EPS. This
statement also requires dual presentation of basic and diluted EPS on the face
of the income statement for entities with a complex capital structure and
requires a reconciliation of the numerator and denominator used for the basic
and diluted EPS computations. SFAS No. 128 requires restatement of all prior EPS
data presented. The Company will implement SFAS No. 128 as of and for the twelve
months ending December 31, 1997, and the adoption will not have a material
effect on the calculation of EPS.
In June 1997, Statement of Financial Accounting Standard ("SFAS") No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an
Enterprise and Related Information" were issued. SFAS No. 130 establishes
standards for reporting and disclosure of comprehensive income and its
components in a full set of general-purpose financial statements. This statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders which is
currently not required. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The Company
is required to adopt both new standards in the first quarter of 1999.
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BUSINESS
The Company is a leading manufacturer and marketer of a diversified line of
well recognized branded consumer products, including PLAYTEX tampons, PLAYTEX
infant care products, BANANA BOAT sun care products, PLAYTEX household latex
gloves and WOOLITE rug and upholstery cleaning products. In 1996, approximately
94% of the Company's net sales were derived from the sale of products in which
it holds the number one or two market share position. Since 1994, the Company
has leveraged its brand name recognition, stable market position and strong
distribution network to grow its Infant Care and Sun Care businesses, both of
which have experienced rapid growth in market share and net sales. For the
twelve months ended June 28, 1997, the Company generated net sales and EBITDA of
$495.1 million and $122.8 million, respectively.
The following table sets forth the Company's principal products lines and
certain related data for 1996:
<TABLE>
<CAPTION>
MARKET MARKET PERCENT OF
PRODUCT PRIMARY BRAND NAME POSITION SHARE NET SALES NET SALES
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Feminine Care.................... PLAYTEX #2 26% $ 225.5 45%
Infant Care...................... PLAYTEX 1 36 109.5 22
Sun Care......................... BANANA BOAT, BIOSUN 2 19 73.3 15
Household Latex Gloves........... PLAYTEX 1 38 32.8 7
Rug & Upholstery Cleaning........ WOOLITE 2 20 27.7 5
Other............................ 29.9 6
------ ---
Total........................ $ 498.7 100%
------ ---
------ ---
</TABLE>
COMPETITIVE STRENGTHS
The Company believes it is distinguished by the following competitive
strengths:
EXCEPTIONAL CONSUMER FRANCHISE. The Company's core brand names--PLAYTEX,
BANANA BOAT AND WOOLITE--are well known and respected by both consumers and
retailers for their high quality and product innovations. To further develop and
maintain brand name awareness and consumer loyalty, the Company has spent, on
average, in excess of $100 million annually on advertising and promotional
support over the past three years.
STRONG AND STABLE CASH FLOWS. The strength of the Company's consumer
franchise and brand names is reflected in its consistently strong cash flows and
operating margins. These characteristics, together with relatively low levels of
capital expenditures, provide the Company with financial flexibility to reduce
indebtedness and implement its growth strategy.
LEADING MARKET POSITIONS IN ATTRACTIVE CATEGORIES. In 1996, the Company
generated approximately 94% of its net sales from categories in which it holds a
number one or two market share. Furthermore, the Company believes that the core
categories in which it competes are inherently attractive. The tampon category
is characterized by slow but steady growth, a high degree of customer brand
loyalty and a relatively low sensitivity to economic cycles. The Infant Care and
Sun Care categories are growing more rapidly due to the receptiveness of
consumers to new products and increased consumer awareness of sun care issues,
respectively. Further, the Company believes that both the Infant Care and Sun
Care categories are consolidating and that this consolidation favors market
leaders, such as the Company, with marketing expertise, broad product lines and
national distribution.
CONSUMER-FOCUSED PRODUCT INNOVATION. The Company devotes significant
resources and attention to product innovation and consumer research to develop
products which offer new and distinctive benefits to
44
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its consumers. In 1996, the Company continued its history of product innovation
by introducing (i) SLIMFITS, a tampon with a softer and narrower plastic
applicator designed to appeal to teenagers; (ii) DROP-INS, ready-formed
disposable baby bottles, a high convenience product aimed at reusable bottle
users; and (iii) BIOSUN, a newly-formulated line of sun care products aimed at
active, health-conscious consumers.
WELL-ESTABLISHED DISTRIBUTION CHANNELS. The Company's products are
distributed in virtually every major food chain, drug chain, mass merchandiser
and price club in the United States through a combination of direct sales
personnel and independent brokers. This depth and breadth of distribution
permits the Company to rapidly introduce new products and to quickly realize
synergies in integrating acquired product lines. To further enhance its
relationship with its retailers, the Company is focusing sales and marketing
efforts on category management programs. In these programs, the Company works
with retailers to increase category sales and profitability through detailed
analysis of consumer buying habits and improved merchandising techniques. The
Company believes that such programs strengthen the relationship between the
Company and the retailer and increase the Company's sales.
GROWTH STRATEGY
In 1995, partnerships managed by Haas Wheat, a private investment firm,
invested $180.0 million in the Company. The proceeds of the equity investment
were used by the Company to reduce bank debt and increase its operating and
financial flexibility. In addition, Michael R. Gallagher, a seasoned executive
with over 28 years of consumer marketing and general management experience, was
appointed chief executive officer in order to lead the Company's growth
strategy, the principal features of which are outlined below:
CONTINUE SALES GROWTH THROUGH MARKET SHARE GAINS. The Company has
consistently gained market share in its Infant Care and Sun Care businesses due
to product innovations, creative merchandising techniques, strong consumer
marketing programs and increases in the number of SKUs carried per point of
distribution. In the Infant Care business, the Company's net sales grew at a
compound annual rate of 19% between 1994 and 1996, while its market share
increased from 30% to 36% over the same period. In the Sun Care business, the
Company's net sales grew at a compound annual rate of 24% between 1994 and 1996
and its market share increased from approximately 16% in 1994 to 19% in 1996.
MAKE SYNERGISTIC ACQUISITIONS. The Company intends to accelerate its growth
in net sales and cash flow by acquiring growing brands in attractive categories.
The Company seeks to acquire other consumer product companies or brands whose
products may be sold through the Company's distribution channels and that would
benefit from the PLAYTEX brand name or the Company's expertise in marketing,
sales and product development. The acquisition of the BANANA BOAT product line
demonstrates the Company's ability to add value to the businesses it acquires.
Since the Company first acquired the distribution rights to the BANANA BOAT
brand name, its market share has grown from approximately 12% in 1992 to 19% in
1996, principally as a result of new product introductions and significant
improvements in the brand's distribution and marketing.
SELECTIVELY EXTEND BRANDS INTO NEW PRODUCT CATEGORIES. The Company intends
to extend its PLAYTEX and BANANA BOAT brand names into new product categories in
order to capitalize on its brand name recognition, its reputation for
customer-focused product development and its well-established distribution
network. Initially, the Company plans to focus on personal care categories
closely related to the Company's existing businesses.
BUILD INTERNATIONAL SALES. Historically, less than 5% of the Company's net
sales have been generated outside the United States and Canada. In July 1996,
the Company formed a sales and marketing team dedicated to strengthening the
Company's competitive position overseas. The team is currently seeking to
identify strong local partners to distribute the Company's products abroad and
is also seeking to capitalize on its strong domestic relationship with key U.S.
retailers with international operations, such as
45
<PAGE>
[LOGO]
and Wal-Mart. The Company intends to focus its initial efforts on its
Infant Care and Sun Care
products, primarily in Europe, Latin America and the Pacific Rim.
PRODUCTS
FEMININE CARE. The Company's largest-selling brand is PLAYTEX tampons,
which in 1996 accounted for approximately 45% of the Company's net sales. For
over 20 years, PLAYTEX tampons have been the second largest-selling tampon brand
in the United States.
Tampons represented approximately 40% of the U.S. feminine sanitary
protection market in 1996 and accounted for approximately $750 million in retail
sales. Since 1991, the tampon market has grown at a compound annual rate of 2%.
Company research indicates that brand loyalty rates in the tampon category are
high relative to other consumer product categories. The research further
suggests that women generally develop brand preferences during their adolescent
years and early twenties and are likely to maintain a high degree of brand
loyalty over time.
Playtex has two major product lines in the Feminine Care business: plastic
applicator tampons and cardboard applicator tampons. The plastic applicator
business represented 90% of the Playtex branded domestic tampon business in 1996
and is comprised of three product offerings: GENTLE GLIDE, Playtex's original
plastic tampon; SOFT COMFORT, with an applicator made of a soft, plastic
material designed to improve comfort; and SLIMFITS, a new line of tampons
introduced in late 1996, developed for the first-time tampon user. The SILK
GLIDE brand is Playtex's line of cardboard applicator tampons. This product line
features a rounded-tip cardboard applicator and a unique surface coating that
provides the consumer with a quality product in the cardboard applicator segment
of the tampon market.
The Company's market share of the domestic tampon market declined from 29%
in 1994 to 26% in 1996 as a result of heavy promotional activity by Tambrands in
1995 and early 1996 as Tambrands management sought to accelerate category growth
and increase its market share. As competitors (including the Company) responded
with their own promotional activities, average retail selling prices in the
category declined, and retail and consumer inventories grew. In the second half
of 1996, the retail price environment stabilized, and since the fourth quarter
of 1996, average retail selling prices for both the category and the Company
have increased. The Company's market share has been relatively stable since July
1996 at approximately 25%, although shipments in late 1996 and early 1997 have
still been impacted by the high retail inventories remaining from earlier
promotional activity.
Management's strategy with respect to the Feminine Care business is to
maintain its market share at 1996 levels and increase net sales in line with
growth in the category. The Company intends to continue shifting its marketing
resources into more consumer-driven, brand-building activities such as
advertising and product improvement in order to preserve the brand's premium
price position and maximize cash flow from the business.
The introduction of SLIMFITS in late 1996 is an example of Playtex's
innovative product development and new advertising and promotional strategies.
SLIMFITS were developed to appeal to a key segment of the tampon market, young
teens. SLIMFITS have a softer and more narrow plastic applicator providing for
greater comfort. Because pediatricians are key advisors to young women first
choosing their form of feminine protection, SLIMFITS are being advertised to the
pediatric community through trade publications. Consumer promotion included a
direct-mail program which provided two million SLIMFITS samples to teens,
free-standing newspaper inserts, and advertising in teen magazines. The Company
believes that SLIMFITS will build its business by encouraging young women to use
tampons rather than pads at an earlier age, and by developing brand loyalty for
PLAYTEX tampons at a time when lifelong preferences are being formed.
INFANT CARE. The Company's second largest product category by net sales is
Infant Care, which is comprised of the PLAYTEX disposable nurser system, cups
and mealtime products, reusable hard bottles and pacifiers. In 1996, Infant Care
accounted for 22% of the Company's total net sales. In comparison to the
46
<PAGE>
prior year, Infant Care sales grew 25% in 1996. The Company's market share in
infant feeding was 36% in 1996, which increased from 30% in 1995. The Company is
the dominant brand in both the disposable feeding and the infant cup segments
with market shares of 73% and 70%, respectively.
The PLAYTEX disposable feeding system, introduced in 1960, was the first
disposable system on the market. Since that time, Playtex has provided
innovative product improvements as a healthy alternative to breast feeding. In
1996, Playtex continued to lead innovation in this category with its new
DROP-INS ready-formed disposable bottle. DROP-INS are expected to attract
consumers who usually buy reusable bottles to the disposable category, thereby
increasing sales in that product category.
In 1994, Playtex introduced the SPILL-PROOF cup. The domestic infant cup
segment of the infant feeding category has almost doubled since this
introduction. Sales of the popular 6-ounce version and a larger 9-ounce size
have increased the Company's market share in the infant cup segment from 29% in
1994 to 48% in 1995 and 70% in 1996. In 1996, the Company introduced another
innovative cup to the market, the QUICKSTRAW bottle. This product, which is
focused on the older child, has a sliding cap that hides a retractable straw and
extends the age range of the children who use PLAYTEX cups and bottles.
The Company's carefully designed message of quality, health and convenience
is delivered in a variety of ways including a professional sampling and
advertising program targeting pediatricians and pediatric nurses. Programs
directed to new mothers include distribution of millions of samples and coupons
prenatally via childbirth instructors and postnatally in hospitals and at home.
SUN CARE. The Company's Sun Care business, which accounted for 15% of 1996
net sales, consists of an extensive line of sun care products designed for
specific uses, such as sun protection in sun protection factors ("SPFs") from 4
to 50, waterproof and sweat proof formulas and infant and children's products.
The Company also sells a wide variety of BANANA BOAT skin care products,
including sunless tanning lotion, after-sun products, moisturizers and skin
treatment formulas containing additives such as Vitamin E and aloe vera gel. For
1996, BANANA BOAT had a 19% market share, compared to an approximate 12% market
share in 1992, prior to the Company's involvement with the product line.
Since 1992, the Sun Care category has grown at a compound annual rate of
approximately 6%. The Company believes the growth prospects for the sun care
market are favorable as a result of increasing consumer awareness of the need
for sunscreen protection and consumers' desire for sun care products targeted
towards their specific age and needs.
Consistent with this trend, the Company has embarked on an aggressive
strategy to introduce new products. For the 1997 sun care season, the Company
launched 21 new product offerings targeted at clearly defined segments of the
sun care market. Among the new BANANA BOAT products were TAN EXPRESS, ACTION
SPORT spray gel, Oil free lotion and BITE BLOCK. One of the most promising
introductions is the BIOSUN sun care line, positioned for today's active,
health-conscious consumer. BIOSUN, a premium product line tested by
dermatologists and recommended by The Skin Cancer Foundation, was formulated to
provide long-lasting protection. The brand has gained visibility, in part, due
to an educational program specifically targeted to the medical community,
especially dermatologists.
The Company focuses on a number of different distribution outlets to deliver
its sun care products to the consumer. BANANA BOAT is particularly strong with
mass merchandisers among whom the brand held a 25% market share for the six
months ended June 1997, the highest share among such retailers. Another valuable
part of the focused sales effort for Sun Care products is the use of more than
35 vans to call upon key outlets in the southern and coastal areas of the
country. This ensures product availability and selection in the key locations
during the prime sun care buying season. The van operators manage product
inventory at the store level, invoice customers and transmit key marketing data
to the Company through a network of hand-held computers. This technology and the
information it supplies provide the Company with a competitive advantage
relative to its smaller competitors.
47
<PAGE>
Industry convention and the seasonal nature of the sun care business
requires that manufacturers of sun care products provide retailers with the
opportunity to return unsold products at the end of the season. To better
reflect the impact of potential returns, the Company provides for estimated
returns in its reported operating results as sales are made throughout the year.
HOUSEHOLD LATEX GLOVES. Since the Company introduced the first household
latex glove in the U.S. in 1954, PLAYTEX gloves have held the number one market
share. The Company's leadership position continued in 1996 with a 38% share of
this category. This represents an increase in market share from 32% in 1994 and
35% in 1995. Playtex's nationally recognized brand name, based upon its
reputation for superior quality, durability and protection, provides a strong
competitive advantage as the Company's primary competition is from private label
and regional brands.
In 1996, this product line accounted for approximately 7% of the Company's
total net sales. The non-disposable household latex glove market had retail
sales of approximately $75 million in 1996, representing 47 million pairs of
gloves.
The Company repositioned its glove product line in 1996 to better capitalize
on its leadership position in this market. The repositioning included: (i) a $2
million capital expenditure program to manufacture a newly designed glove which
is more comfortable and better fitting than previous gloves; (ii) new and more
modern packaging; (iii) the first television advertising for the product in over
twenty years; and (iv) more innovative merchandising programs designed to create
incremental consumer demand for gloves.
RUG AND UPHOLSTERY CLEANING. On February 28, 1995, Playtex acquired the
assets of the WOOLITE rug and upholstery cleaning products business for $20
million. WOOLITE is the number two rug and upholstery cleaning product with 20%
of the market. In 1996, WOOLITE accounted for 5% of the Company's net sales.
Playtex acquired this product line because of its: (i) strong brand name; (ii)
number two position in a growing category; (iii) distribution alongside gloves
in food stores, drug chains and mass merchandisers; and (iv) opportunity for
line extensions and more effective marketing programs. In 1996, Playtex
introduced new, distinctive packaging to enhance communication of the product
attributes to the consumer. In addition, the Company launched an improved Pet
Stain spray in 1996 and a new foam Pet Carpet Cleaner in early 1997.
OTHER. In 1996, Hair Care products contributed approximately 5% of the
Company's net sales. As a result of management's evaluation of JHIRMACK's market
share and net sales, the Company effected a write-off of all of the goodwill
associated with the JHIRMACK business in the third quarter of 1993.
The Company manufactures and distributes toothbrushes under the TEK brand
name. In 1996, this line contributed approximately $4.7 million in net sales.
MARKETING
The Company allocates a significant portion of its revenues to the
advertising and promotion of its products. Expenditures for these purposes were
$99.0 million, $117.6 million and $119.4 million, in 1994, 1995 and 1996,
respectively. As part of the Company's strategic shift to a more consumer driven
marketing strategy, the Company has shifted a greater percentage of its spending
to brand-building activities, such as advertising and sampling programs, and has
decreased price-oriented trade spending.
The Company believes it is responsible for, and will benefit from, the
building and development of the markets in which it competes. As a result, the
Company is also aggressively developing new category management programs--the
process of working with retailers to increase product category sales and
profitability through analysis of consumer buying habits and improved
merchandising techniques. Given the Company's leadership positions in its core
categories, it expects to benefit disproportionately relative to its competitors
from such category-building activities.
48
<PAGE>
COMPETITION
The markets for the Company's principal products are highly competitive.
They are characterized by the frequent introduction of new products, often
accompanied by major advertising and promotional programs. The Company competes
primarily on the basis of product quality, product differentiation and brand
name recognition supported by advertising and promotion.
The Company's major competitor in the tampon market is Tambrands, whose
product, TAMPAX, had a 49% market share in 1996. On July 21, 1997, Tambrands was
acquired by Procter & Gamble. Other key competitors in the tampon market include
Kimberly-Clark Corporation, Johnson & Johnson and various private label
suppliers. In its other businesses, the Company's competitors consist of a large
number of domestic and foreign companies, a number of which have significantly
greater financial resources and less leverage than the Company.
The Company believes that the market for consumer products will continue to
be highly competitive. The level of competition may intensify in the future,
including higher spending for advertising and promotion, new product initiatives
and continued activity in the private label sector.
REGULATION
Government regulation has not materially restricted or impeded the Company's
operations. Certain of the Company's products are subject to regulation under
the Federal Food, Drug and Cosmetic Act and the Fair Packaging and Labeling Act.
The Company is also subject to regulation by the Federal Trade Commission with
respect to the content of its advertising, its trade practices and other
matters. The Company is subject to regulation by the United States Food and Drug
Administration in connection with its manufacture and sale of tampons. See
"--Legal Proceedings."
DISTRIBUTION
The Company sells its products through direct sales personnel, independent
food brokers and exclusive distributors. In 1996, supermarkets, drug stores and
mass merchandisers and other outlets accounted for 40%, 19% and 41%,
respectively, of the Company's net sales. In recent years, sales through mass
merchandisers and price clubs, as a percentage of total sales, have experienced
gains at the expense of drug stores, while sales through supermarkets have
generally remained constant.
The field sales force makes sales presentations at the headquarters or home
offices of its customers, where applicable, as well as to individual retail
outlets. The sales representatives focus their efforts on selling the Company's
products, providing services to its direct customers and executing programs to
ensure sales to the ultimate consumer. Consumer-directed programs include
arranging for on-shelf and separate displays, obtaining feature price reductions
and coordinating cooperative advertising participation. Independent food brokers
supplement the direct sales force in the food class of trade, primarily by
providing more effective coverage at the store level.
During 1996, Playtex restructured its sales force into two separate
organizations: the Consumer Products Division for Sun Care and Household
Products, and the Personal Products Division for Feminine Care and Infant Care
Products. This new structure allows the Company's sales forces to focus more
effectively on individual product lines and its new category management
initiatives, which the Company anticipates will allow a more effective and
efficient integration of future acquired brands.
RESEARCH AND DEVELOPMENT
The Company maintains ongoing research and development programs in Paramus,
New Jersey. Approximately 55 employees are engaged in these programs, for which
expenditures were $5.8 million, $6.5 million and $7.3 million, in the 1994, 1995
and 1996 years, respectively.
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TRADEMARKS AND PATENTS
The Company has proprietary rights to a number of trademarks important to
its businesses. See "Patents and Trademarks." The Company also owns a
royalty-free license in perpetuity to the WOOLITE trademark for rug and
upholstery cleaning products in the United States and Canada. The PLAYTEX and
LIVING trademarks in the United States and Canada are owned by Playtex
Marketing, a corporation owned equally by the Company and Apparel. Playtex
Marketing is responsible for protecting, exercising quality control over and
enforcing the trademarks. The Company and Apparel each have licenses from
Playtex Marketing for the use of such trademarks in the United States and Canada
on a perpetual, royalty-free basis; Apparel's license is for apparel and
apparel-related products, and the Company's license is for all other products.
In all other countries, Apparel retains title to the PLAYTEX and LIVING
trademarks, subject to a perpetual, royalty-free license to the Company to use
such trademarks for all products other than apparel products.
The Company also owns various patents related to certain products and their
method of manufacture, including patents for tampon wrap material, the assembly
of the compact tampon, the tampon inserter, the baby nurser holder, the
configuration of certain baby pacifiers, nipples and cups and formulations for
certain sun care and hair care products. The patents expire at varying times,
ranging from 1997 to 2014. The Company also has pending patent applications for
various products and methods of manufacture relating to its tampon, nurser and
toothbrush businesses. While the Company considers its patents to be important
to its business, it believes that the success of its products is more dependent
upon the quality of these products and the effectiveness of its marketing
programs. No single patent is material to the business of the Company.
RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company in the manufacture of its
products are synthetic fibers, resin-based plastics and other chemicals and
certain natural materials, all of which are normally readily available. While
all raw materials are purchased from outside sources, the Company is not
dependent upon a single supplier in any of its operations for any material
essential to its business or not otherwise commercially available to the
Company. The Company has been able to obtain an adequate supply of raw
materials, and no shortage of such materials is currently anticipated.
CUSTOMERS AND BACKLOG
No single customer or affiliated group of customers represents 10% or more
of the Company's sales, except for Wal-Mart (approximately 15% in 1994, 17% in
1995 and 18% in 1996). For each of such periods, net sales to the Company's next
three largest customers represented in the aggregate approximately 11% in 1994,
12% in 1995 and 12% in 1996 of the total net sales of the Company. The loss of
sales to Wal-Mart could have a material adverse effect on the business and
operations of the Company. In accordance with industry practice, the Company
grants credit to its customers at the time of purchase. In addition, the Company
grants extended payment terms to new customers and for the initial sales of
introductory products and product line extensions, and it grants extended terms
on its BANANA BOAT products due to industry convention and the seasonal nature
of this business.
The Company's policy is not to accept returned goods, except for certain Sun
Care products, which are seasonal in nature. Exceptions to this policy are
authorized by management of the sales organization. Returns result primarily
from Sun Care seasonal products, damage and shipping discrepancies and generally
are not material to the total net sales of the Company.
Because of the short period between order and shipment dates (generally less
than one month) for most of the Company's sales, the dollar amount of current
backlog is not considered to be a reliable indication of future sales volume.
50
<PAGE>
EMPLOYEES AND LABOR RELATIONS
The Company's worldwide workforce consisted of approximately 1,650 employees
as of July 8, 1997, of whom 180 were located outside the United States,
primarily in Canada. Of the United States facilities, only the facility at
Watervliet, New York, has union representation. The collective bargaining
agreement for this facility covers approximately 190 workers and expires on June
28, 2000. The Company believes that its labor relations are satisfactory and no
material labor cost increases, other than those in the ordinary course of
business, are anticipated.
ENVIRONMENTAL
The Company believes that it is in substantial compliance with federal,
state and local provisions enacted or adopted regulating the discharge of
materials hazardous to the environment. There are no significant capital
expenditures for environmental control in the current year or expected in the
near future. See "--Legal Proceedings."
PROPERTIES
The principal executive offices of the Company are located at 300 Nyala
Farms Road, Westport, Connecticut 06880 and are occupied pursuant to a lease
which expires in 2004. The Company operates manufacturing and distribution
facilities in Dover, Delaware; Watervliet, New York; and Arnprior and Malton,
Canada. The Company maintains a research and development facility in Paramus,
New Jersey, which is leased from Apparel on a month-to-month basis. The Arnprior
facility, primarily a warehouse and assembly operation, is owned by the Company.
The Malton facility, a warehouse and office site, is leased from Apparel. This
lease extends to 2004. For 1996, the Company's average manufacturing capacity
utilization rate was approximately 75%. The Company does not anticipate any
material acquisition of plant for use in its current businesses or any
significant increase in the capacity thereof in the near future.
The following table sets forth the principal properties of the Company at
June 28, 1997:
<TABLE>
<CAPTION>
NO. OF ESTIMATED
FACILITIES SQUARE FOOTAGE
<S> <C> <C> <C> <C>
Facilities Owned
Manufacturing/Office/Distribution/Warehouse
Dover, DE...................................... 3 710,000
Watervliet, NY................................. 1 159,600
Arnprior, Canada............................... 1 91,800
Facilities Leased
Office/Distribution/Warehouse
Dover, DE...................................... 5 310,000
Malton, Canada................................. 1 72,800
Westport, CT................................... 1 41,700
Paramus, NJ.................................... 1 33,000
Guaynabo, PR................................... 1 13,700
</TABLE>
In May 1997, the Company signed an agreement to lease certain office space
located in Allendale, New Jersey. This facility contains 43,500 square feet and
will house the Company's Research and Development group. This new lease has a
term of 15 years with two five-year renewal options. The Paramus, New Jersey
facility noted in the above table will be vacated when construction of the
Allendale, New Jersey facility is completed.
51
<PAGE>
LEGAL PROCEEDINGS
Beginning in 1980, studies were published leading to the hypothesis that
tampons are associated with TSS. Since 1980, numerous claims have been filed
against manufacturers of tampons, a small percentage of which have been
litigated to conclusion.
The number of TSS claims relating to PLAYTEX tampons has declined
substantially over the years. During the mid-1980s, there were approximately 200
pending claims at any one time relating to PLAYTEX tampons. As of the end of
June 1997, there were approximately 12 pending claims, although additional
claims may be asserted in the future. For claims filed from October 1, 1985
until November 30, 1995, the Company is self-insured for TSS claims, and bears
the costs of defending those claims, including settlements and trials. Effective
December 1, 1995, the Company obtained insurance coverage with certain limits in
excess of the self-insured retention of $1.0 million per occurrence/$4.0 million
in the aggregate, on claims occurring on or after December 1, 1995.
The incidence rate of menstrually associated TSS among tampon users has
declined significantly over the years. In 1982, the rate was reported to be
between six and seventeen occurrences per 100,000 menstruating women per year.
The most recent reported information as of 1989 is that the rate is
approximately one occurrence per 100,000.
Based on the Company's experience with TSS cases, its evaluation of the
currently pending claims, the reported decline in the incidence of menstrually
associated TSS, the federally-mandated warning about TSS on and in its tampon
packages and the development of case law upholding the adequacy of tampon
warnings which comply with federally-mandated warnings, the Company believes
that there are no claims or litigation pending, including the TSS cases, which
could have a material adverse effect on the consolidated financial position,
results of operations or cash flows of the Company.
The Company, as successor to the Family Products businesses of IPI, is
presently participating as part of a group of several potentially responsible
corporate parties ("PRP Group") in the remediation of the Wildcat Landfill in
Dover, Delaware, which has been designated as a "Superfund" site by the EPA. In
June 1989, the PRP Group entered into a settlement pursuant to which the Company
(together with Apparel) assumed a share of the remediation costs, which share,
based on reasonable engineering estimates, was $565,000 for both companies
combined. The Company and Apparel have each paid $300,000 (or a total of
$600,000) to an escrow fund under an agreement with other settling parties and
site remediation has been completed. Associated monitoring costs are not
expected to be material.
The Company has joined the PRP Group with respect to the Kent County
Landfill Site in Houston, Delaware, which has been designated a "Superfund" site
by the State of Delaware. A study of the site is being conducted to formulate a
remediation plan. The Company's allocated share of the costs of the remediation
study is not expected to exceed $100,000, which amount will be shared equally
with Apparel. Although the remedial costs associated with the site will be
difficult to assess until the study is completed, based on the information
currently available to the Company, the nature and quantity of material
deposited by the Company and the number of other entities in the PRP Group who
are expected to share in the costs and expenses, the Company does not believe
that the costs to the Company will be material. The Company and Apparel will
share equally all expenses and costs associated with IPI's involvement with this
site.
The Company is a defendant in various other suits, claims and investigations
which arise in the normal course of business. In the opinion of management, the
ultimate disposition of these matters, including those described above, will not
have a material adverse effect on the consolidated financial position, results
of operations or cash flows of the Company.
The Company is subject to regulation by the United States Food and Drug
Administration in connection with its manufacture and sale of tampons.
52
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the Company's directors
and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Robert B. Haas..................... 50 Chairman and Director
Michael R. Gallagher............... 51 Chief Executive Officer and Director
Michael F. Goss.................... 37 Executive Vice President, Chief Financial Officer and Director
Richard G. Powers.................. 51 President, Personal Products Division
Max R. Recone...................... 42 President, Consumer Products Division
James S. Cook...................... 45 Senior Vice President, Operations
Irwin S. Butensky, Ph.D............ 61 Senior Vice President, Research and Development
Thomas H. Lee...................... 53 Director
Kenneth F. Yontz................... 52 Director
Timothy O. Fisher.................. 47 Director
Douglas D. Wheat................... 46 Director
Michael R. Eisenson................ 41 Director
C. Ann Merrifield.................. 46 Director
</TABLE>
The business experience, principal occupations and employment as well as the
periods of service of each of the directors and executive officers of the
Company during the last five years are set forth below.
ROBERT B. HAAS has been Chairman and a Director of the Company since 1995.
Mr. Haas has been actively involved in private investments since 1989,
specializing in leveraged buyouts. He has served as Chairman of the Board and
Chief Executive Officer of Haas Wheat since 1995; he has also been Chairman of
the Board and Chief Executive Officer of Haas Wheat Advisory Partners
Incorporated since 1992 and Chairman of the Board of Haas & Partners
Incorporated since 1989 (each of which is a private investment firm specializing
in leveraged acquisitions). Mr. Haas serves as a director of Specialty Foods
Acquisition Corporation, Specialty Foods Corporation, Sybron International
Corporation, Smarte Carte Corporation and Walls Holding Company, Inc.
MICHAEL R. GALLAGHER has been the Chief Executive Officer and a Director of
the Company since 1995. Prior to joining the Company, Mr. Gallagher was Chief
Executive Officer of North America for Reckitt & Colman PLC ("R&C") from 1994 to
1995. Mr. Gallagher was President and Chief Executive Officer of Eastman Kodak's
L&F Products subsidiary from 1988 until the subsidiary was sold to R&C in 1994.
From 1984 to 1988, Mr. Gallagher held various executive positions with the Lehn
& Fink Group of Sterling Drug. From 1982 to 1984, he was Corporate Vice
President and General Manager of the Household Products Division of The Clorox
Company ("Clorox"). Prior to that, Mr. Gallagher had various marketing and
general management assignments with Clorox and with Procter & Gamble. He is
presently a director of Fleet Bank N.A. and the Grocery Manufacturers
Association.
MICHAEL F. GOSS has been Executive Vice President and Chief Financial
Officer of the Company since December 1994. He has served as a Director of the
Company since 1995. From 1992 to 1994, Mr. Goss was Treasurer and Vice
President--Corporate Development of Oak Industries, Inc. ("Oak") an electronic
components company. From 1990 to 1992, he was Director of Financial Planning for
Oak.
RICHARD G. POWERS has been the President of the Personal Products Division
of the Company since 1996. Prior to joining the Company, Mr. Powers was
President of R&C's North American Personal Products Division. From 1992 to 1995,
he was Vice President of Sales for R&C, and from 1990 to 1992 he was Vice
President of Marketing for R&C's Durkee-French Foods Division. From 1973 to
1990, Mr. Powers held various positions in marketing and general management at
General Foods Corp.
MAX R. RECONE has been the President of the Consumer Products Division of
the Company since March 1996. From 1995 to 1996, he was Vice President and
Business Manager for Sun Care, Hair Care and Household Products. From 1993 to
1995, he served as Vice President--Banana Boat. From 1992 to 1993, he was Vice
President--Sales of the Company. From 1990 to 1992, Mr. Recone served as Vice
President/ General Manager of Playtex Limited, the Company's Canadian
subsidiary.
53
<PAGE>
JAMES S. COOK has been Senior Vice President, Operations of the Company
since 1991. From 1990 to 1991, he was Vice President, Dover Operations of the
Company. From 1988 to 1990, he was Vice President of Distribution, Logistics &
MIS of the Company. From 1982 to 1988, Mr. Cook held various senior level
positions in manufacturing and distribution with the Company. From 1974 to 1982,
he held various manufacturing and engineering positions at Procter & Gamble.
IRWIN S. BUTENSKY, PH.D., has been Senior Vice President, Research and
Development since 1990. From 1979 to 1990 he was Vice President of Research &
Development for the Company. From 1967 to 1979, Dr. Butensky held several senior
technical positions at Richardson-Vicks, Inc., his last being Director of
Dermatology Research.
THOMAS H. LEE has been a Director of the Company since 1988. Since 1974, Mr.
Lee has been President of the Thomas H. Lee Company, a firm engaged in
investment activities. He is currently a director of Autotote Corporation
(manufacturer of gaming industry control equipment), Finlay Enterprises, Inc.
(operator of leased fine jewelry departments), First Security Services
Corporation (provider of security services), Signature Brands (USA), Inc.
(manufacturer of consumer, medical and office supplies), Livent, Inc. (theater
productions), and Vail Resorts, Inc. (operator of resorts). Mr. Lee is also a
general partner of the ML-Lee Acquisition Fund, L.P., ML-Lee Acquisition Fund
II, L.P. and ML-Lee Acquisition Fund (Retirement Accounts) II, L.P.
(collectively, the "ML-Lee Acquisition Funds"). Mr. Lee is Chairman of Thomas H.
Lee Advisors I, and general partner of Thomas H. Lee Advisors II, L.P., the
investment advisors to the ML-Lee Acquisition Funds. He is the general partner
of the THL Equity Advisors Limited Partnership, the general partner of and
investment advisor to Thomas H. Lee Equity Partners, L.P.
KENNETH F. YONTZ has been a Director of the Company since 1995. Mr. Yontz
has been Chairman of the Board, President and Chief Executive Officer of Sybron
International Corporation (a manufacturer of dental and laboratory products)
since 1987. He previously served as Executive Vice President of the Allen
Bradley Company. He is a director of Berg Electronics, Inc. (a manufacturer of
connectors).
TIMOTHY O. FISHER has been a Director of the Company since 1996. Mr. Fisher
has been a Vice President since 1986 of The Hillman Company (diversified
investments and operations) and is a director of several private companies.
DOUGLAS D. WHEAT has been a Director of the Company since June 1995. Mr.
Wheat has been President of Haas Wheat since 1995; President of Haas Wheat
Advisory Partners Incorporated since 1992 (each of which is a private investment
firm specializing in leveraged acquisitions); he was Co-Chairman of Grauer &
Wheat, Inc. (a private investment firm) from 1989 to 1992 and Senior Vice
President of Donaldson, Lufkin & Jenrette Securities Corporation from 1985 to
1989. Mr. Wheat serves as a director of Specialty Foods Acquisition Corporation,
Specialty Foods Corporation, Smarte Carte Corporation, and Walls Holding
Company, Inc.
MICHAEL R. EISENSON has been a Director of the Company since March 1997. Mr.
Eisenson is the President and Chief Executive Officer of Harvard Private Capital
Group, Inc. ("HPC"), which is the investment advisor for the private equity and
real estate portfolios of the Harvard University endowment fund. Prior to
joining HPC in 1986, Mr. Eisenson was a Manager with The Boston Consulting Group
from 1981 to 1985. He serves on the Boards of Directors of Harken Energy
Corporation, ImmunoGen, Inc. and United Auto Group, Inc., as well as those of
several private companies.
C. ANN MERRIFIELD has been President of Genzyme Genetics, a wholly owned
subsidiary of Genzyme Corporation (a biotechnology company), since 1996. She
previously served as Vice President, Marketing and Business Development of
Genzyme Genetics from 1992 to 1996. Prior to that, Ms. Merrifield was a Partner
with Bain and Company (a consulting firm) from 1987 to 1992.
There are no family relationships among any of the foregoing persons.
54
<PAGE>
AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
Each of the Named Executive Officers (as defined herein) is party to an
agreement with the Company with respect to termination of employment. In the
event of termination by the Company without Cause (as defined in such
agreements) which occurs prior to a Change of Control (as defined in such
agreements), Mr. Gallagher and Mr. Goss are entitled to receive two years'
salary, bonus and fringe benefits, and the other Named Executive Officers are
entitled to receive one year's salary, bonus and fringe benefits. In the event
employment is terminated within three years following a Change of Control, each
Named Executive Officer except Mr. Gallagher would receive one year's salary,
bonus and fringe benefits. Mr. Gallagher would enter into a five year
non-compete agreement following termination arising from a Change of Control for
total consideration equal to three years' salary, bonus and fringe benefits. Mr.
Goss is additionally obligated to make himself available as a consultant to the
Company for a period of six months following termination arising from a Change
of Control for total consideration equal to one year's salary, bonus and fringe
benefits. In the event of a Change of Control, each Named Executive Officer is
entitled to receive a one-time annual bonus, whether or not employment is
terminated.
55
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 28, 1997 by (i) each director
of the Company, (ii) its five most highly compensated executive officers (the
"Named Executive Officers"), (iii) each person believed by the Company to own
beneficially more than five percent of the outstanding Common Stock, and (iv)
all directors and Named Executive Officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) PERCENT
<S> <C> <C>
Robert B. Haas............................................... 20,000,000(2) 39.3
Michael R. Gallagher......................................... 252,333(3) *
Michael F. Goss.............................................. 108,001 *
Richard G. Powers............................................ -- --
Max R. Recone................................................ 95,001 *
James S. Cook................................................ 145,001 *
Thomas H. Lee................................................ 3,336,455(4) 6.6
Kenneth F. Yontz............................................. 1,800 *
Timothy O. Fisher............................................ 21,663(5) *
Douglas D. Wheat............................................. -- --
Michael R. Eisenson(6)....................................... 2,915,963 5.7
C. Ann Merrifield............................................ -- --
Stinson Capital Partners, L.P., et al.(7).................... 2,736,500 5.4
909 Montgomery Street
Suite 400
San Francisco, CA 94113
Partnerships managed by Haas Wheat & Partners(2)............. 20,000,000(2)(8) 39.3
All current directors and Named Executive Officers as a group
(12 persons)............................................... 23,960,254 47.1
</TABLE>
- ------------------------
* Indicates less than one percent.
(1) Includes shares that may be acquired upon the exercise of stock options
granted by the Company that are exercisable within 60 days of the Record
Date. The shares beneficially owned include 233,333, 80,001, 55,001, 55,001
and 1,800 shares subject to currently exercisable options granted to Messrs.
Gallagher, Goss, Recone, Cook, and Yontz, respectively, and an aggregate of
425,136 shares subject to currently exercisable options granted to all
directors and Named Executive Officers.
(2) Includes 8,055,555 shares (approximately 15.8% of the outstanding shares)
owned by HWH Capital Partners, L.P., 9,028,482 shares (approximately 17.7%
of the outstanding shares) owned by HWH Valentine Partners, L.P., and
2,915,963 shares (approximately 5.7% of the outstanding shares) owned by HWH
Surplus Valentine Partners, L.P. ("Surplus"). The address of each of the
foregoing partnerships is c/o Haas Wheat & Partners Incorporated, 300
Crescent Court, Suite 1700, Dallas, Texas 75201. The sole general partner of
each of such partnerships is a limited partnership, and the sole general
partner of each of such limited partnerships is a corporation controlled by
Mr. Haas. By virtue of his control of such corporations, Mr. Haas has sole
voting and dispositive power over 17,084,037 shares and shared voting and
dispositive power over 2,915,963 shares.
(3) Includes 9,000 shares held by Mr. Gallagher's children. Mr. Gallagher
disclaims beneficial ownership of these shares.
56
<PAGE>
(4) Includes 1,361,951 shares held of record by 1989 Thomas H. Lee Nominee Trust
dated September 29, 1989, 1,406,204 shares held of record by the ML Lee
Acquisition Fund, L.P., 343,726 shares held of record by the ML Lee
Acquisition Fund II, L.P. and 183,560 shares held of record by the ML Lee
Acquisition Fund II (Retirement Accounts), L.P. Mr. Lee disclaims beneficial
ownership of the shares held by the three ML Lee Acquisition Funds. Certain
of the 1,361,951 shares held of record by the 1989 Thomas H. Lee Nominee
Trust are subject to options to purchase granted by such trust to certain
employees and consultants of The Thomas H. Lee Company. Also included are
20,507 shares held by the Stephen Zachary Lee 1988 Irrevocable Trust and
20,507 shares held by the Robert Schiff Lee 1988 Irrevocable Trust. Mr. Lee
also disclaims beneficial ownership of the shares held by such trusts.
(5) Includes 16,663 shares held of record by Mr. Fisher's spouse and children.
Mr. Fisher disclaims beneficial ownership of these shares.
(6) Represents shares owned by HWH Surplus Valentine Partners, L.P., of which
Phemus Corporation is the sole Limited Partner. Mr. Eisenson is the
President and Chief Executive Officer of Harvard Private Capital Group, the
investment advisor for Phemus. While Mr. Eisenson has shared voting and
dispositive power over the shares, he disclaims beneficial ownership of such
shares.
(7) On February 26, 1997, the Company received a Schedule 13D dated February 18,
1997 filed with the SEC in respect of ownership of an aggregate of 2,736,500
shares of Common Stock by a group comprised of Stinson Capital Partners,
L.P., BK Capital Partners IV, L.P., The Carpenters Pension Trust for
Southern California, United Brotherhood of Carpenters and Joiners of America
Local Unions and Councils Pension Fund, Insurance Company Supported
Organizations Pension Plan, Richard C. Blum & Associates, L.P., Richard C.
Blum & Associates, Inc. and Richard C. Blum. Each filing person reported
shared voting power and shared dispositive power with respect to all of such
shares. On June 12, 1997, the Company received an Amendment No. 2 dated June
3, 1997 to the Schedule 13D disclosing that the group, now known as Richard
C. Blum & Associates, L.P., increased its ownership to 3,963,000 shares of
Common Stock. The Company has not attempted to verify independently any of
the information contained in the Schedule 13D or any amendments thereto.
(8) Of these shares, 2,915,963 shares (approximately 5.7% of the outstanding
shares) are owned by Surplus.
57
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT FACILITIES
The Credit Facilities consist of (i) $150 million of borrowings under the
Special Term Loan and (ii) $170 million of credit availability under the New
Credit Agreement, which consist of the $115 million Revolving Credit Facility
and the $55 million Term A Loan.
Amounts borrowed under the New Credit Agreement bear interest, at the option
of the Company, at either (i) the alternative base rate of the administrative
agent thereunder or (ii) a reserve adjusted LIBOR rate, plus a margin which will
vary depending on the ratio of Funded Debt to EBITDA. The Special Term Loan
bears interest at a rate equal to the sum of a LIBOR rate plus 1.5%.
Obligations under the Special Term Loan and the New Credit Agreement are
guaranteed by all of the Company's direct and indirect U.S. subsidiaries other
than Playtex Marketing, and are secured by a perfected first priority security
interest in all of the inventory, accounts receivable and United States patents,
trademarks and trademark licenses of the Company and the domestic Subsidiaries
and by a pledge of the stock of the domestic Subsidiaries and 65 percent of the
stock of certain foreign subsidiaries.
The Credit Facilities contain a number of restrictive covenants, which are
typical for facilities of this type. The New Credit Agreement contains a number
of covenants that restrict the operations of the Company, including restrictions
on, among other things, (i) incurrence of additional indebtedness, (ii)
dividends and restricted payments, (iii) creation of certain liens, (iv) the use
of proceeds from sales of assets and subsidiary stock, (v) sale and leaseback
transactions, (vi) transactions with affiliates, and (vii) certain mergers,
consolidations and transfers of all or substantially all of the assets of the
Company. The New Credit Agreement also will include certain financial covenants,
including (i) a minimum ratio of EBITDA less capital expenditures to interest
expense, and (ii) a minimum ratio of Funded Debt to EBITDA. The agreement
relating to the Special Term Loan contains covenants similar to those contained
in the Indenture.
The New Credit Agreement contains events of default customary for credit
agreements of this type. The Special Term Loan includes events of default
similar to those specified in the Indenture, except that the Special Term Loan
(i) provides only five business days of grace with respect to failure to pay
interest on the Special Term Loan and (ii) includes as an event of default (x)
the Company's failure to pay principal or interest on any other indebtedness
having a principal amount of more than $25.0 million, after giving effect to any
applicable grace period (not to exceed 60 days) in the underlying indebtedness,
and (y) any other default under any agreement relating to such indebtedness, the
effect of which is to entitle the holders thereof or a trustee acting on behalf
of such holders to accelerate the maturity thereof, which default is not cured
or waived within 20 business days. See "Description of the Senior Notes--Events
of Default."
Commitments under the Revolving Credit Facility will be automatically and
permanently reduced by (i) $5.0 million on December 15, 2000 and June 15, 2001,
(ii) $7.0 million on December 15, 2001 and June 15, 2002, and (iii) $8.0 million
on December 15, 2002 and June 15, 2003. The Term A Loan was made available in
the form of a single loan of $55 million on the closing date of the Term A Loan,
will mature on June 15, 2003 and will require installment repayments of
principal beginning September 15, 1999. The Special Term Loan was made available
in the form of a single loan in the amount of $150 million on the closing date
of the Special Term Loan, will be due in full on September 15, 2003 and will
require quarterly repayments of principal of $375,000 beginning September 15,
1997.
SENIOR SUBORDINATED NOTES
Interest payments on the Senior Subordinated Notes are due on June 15 and
December 15 of each year. Principal of the Senior Subordinated Notes is due on
December 15, 2003. As of June 28, 1997, there were $360.0 million aggregate
principal amount of Senior Subordinated Notes issued and outstanding.
58
<PAGE>
The Senior Subordinated Notes are redeemable by the Company in whole or in
part beginning on December 15, 1998 at redemption prices commencing at 104.5% of
their principal amount, plus interest. The Senior Subordinated Notes also may be
redeemed within 90 days of a Change of Control (as defined in the Senior
Subordinated Note Indenture). In addition, upon such a Change of Control, each
holder of a Senior Subordinated Note may require the Company to repurchase all
or part of its Senior Subordinated Notes at a redemption price of 101% of the
principal amount, plus interest.
The Senior Subordinated Notes contain certain restrictions and limitations,
which, among other things, restrict the type and/or amount of additional
indebtedness that may be incurred by the Company or its subsidiaries; payment of
dividends and other distributions; issuances of preferred stock; loans and
advances; certain transactions with Company stockholders and affiliates; certain
mergers and consolidations; certain sales or transfers of assets; the creation
of certain liens; the transfer of assets to certain subsidiaries; and dividends
and other distributions by subsidiaries. The covenants contained in the Senior
Subordinated Notes are, with certain exceptions, similar to those applicable to
the Senior Notes.
The Senior Subordinated Notes are unconditionally guaranteed on an unsecured
senior subordinated basis by certain subsidiaries of the Company.
DUE TO RELATED PARTY
The Company's 15 1/2% Junior Subordinated Notes were issued in connection
with the purchase of common stock of PHI and are held by Playtex Apparel
Partners, L.P. (the "Apparel Partnership"). The interest on the 15 1/2% Junior
Subordinated Notes is payable annually on December 15. Commencing with the
interest payment due December 15, 1994, the Company has made these interest
payments in cash. However, with respect to any such interest amount payable
prior to maturity, the Company may satisfy such payments through the issuance of
additional 15 1/2% Junior Subordinated Notes. The principal and any unpaid
accrued interest on the 15 1/2% Junior Subordinated Notes are payable in cash on
December 15, 2003.
In connection with the Company's 1988 sale of Apparel to the Apparel
Partnership, the Company received 15% debentures (the "15% Debentures") that
were issued by the Apparel Partnership and contain corresponding provisions to
the 15 1/2% Junior Subordinated Notes issued by the Company. The 15% Debentures
held by the Company are reflected in the Consolidated Balance Sheet of the
Company as "Due from Related Party." As of March 29, 1997, the balance of the
obligation of the Company to the Apparel Partnership (shown on the Balance Sheet
as a liability titled "Due to Related Party") was $78.4 million, while the
corresponding balance of the obligation of the Apparel Partnership to the
Company (shown on the Balance Sheet as an asset titled "Due from Related Party")
was $80.0 million. The Company receives interest income in cash on the 15%
Debentures and consequently interest expense on the 15 1/2% Junior Subordinated
Notes is shown net of cash interest income from the 15% Debentures in the
Consolidated Financial Statements.
59
<PAGE>
DESCRIPTION OF THE SENIOR NOTES
The Initial Notes were, and the Exchange Notes offered hereby will be,
issued under the Indenture, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The Indenture is
subject to and is governed by the Trust Indenture Act. The following summary of
the material provisions of the Indenture does not purport to be complete, and
where reference is made to particular provisions of the Indenture, such
provisions, including the definitions of certain terms, are qualified in their
entirety by reference to all of the provisions of the Indenture and those terms
made a part of the Indenture by the Trust Indenture Act. For definitions of
certain capitalized terms used in the following summary, see "--Certain
Definitions." For purposes of this summary, the "Company" refers only to Playtex
Products, Inc. and not to any of its Subsidiaries.
GENERAL
The Senior Notes will mature on July 15, 2004, are limited to $150,000,000
aggregate principal amount, and are general unsecured obligations of the
Company, ranking senior in right of payment to all existing and future
Subordinated Indebtedness of the Company and PARI PASSU in right of payment to
all existing and future Senior Indebtedness of the Company. Each Senior Note
bears interest from July 21, 1997 or from the most recent interest payment date
to which interest has been paid, payable semiannually on January 15 and July 15
of each year, commencing January 15, 1998, to the Person in whose name the
Senior Note (or any predecessor Senior Note) is registered at the close of
business on the January 1 or the July 1 next preceding such interest payment
date.
The Senior Notes are jointly and severally guaranteed on an unsecured senior
basis by all of the Company's existing and future subsidiaries other than
Foreign Subsidiaries and certain other subsidiaries of the Company. Concurrently
with the consummation of the Offering, the Company and the Guarantors entered
into the Credit Facilities which are secured by a first priority lien on
substantially all of the receivables, inventories and intangible assets of the
Company and its domestic Subsidiaries and, accordingly, such indebtedness
effectively ranks prior to the Senior Notes and the Guarantees with respect to
such assets. As of June 28, 1997, after giving effect to the Refinancing, the
aggregate outstanding principal amount of indebtedness of the Company and its
Subsidiaries, other than the Senior Notes and an obligation due to a related
party, would have been approximately $399.4 million. See "Use of Proceeds,"
"Capitalization," and "Description of Certain Indebtedness--Due to Related
Party." The Indenture permits the Company and any Guarantor to incur additional
debt, including secured debt, subject to certain limitations.
The Senior Notes are effectively subordinated to the indebtedness and other
obligations of Foreign Subsidiaries and certain other subsidiaries of the
Company which are not Guarantors. As of June 28, 1997, after giving effect to
the Offering and the application of the net proceeds therefrom, the aggregate
amount of indebtedness and other obligations of such Foreign Subsidiaries and
other subsidiaries would have been $4.7 million. In the event that the
Guarantees would constitute or result in a violation of any applicable
fraudulent conveyance or similar law of any relevant jurisdiction, the liability
of the Guarantor under such Guarantee would be reduced to the maximum amount
permitted under such fraudulent conveyance or similar law.
Principal of, premium, if any, and interest and Liquidated Damages on the
Senior Notes are payable, and the Senior Notes are exchangeable and transferable
at the office or agency of the Company in The City of New York maintained for
such purposes; PROVIDED, HOWEVER, that payment of interest may be made at the
option of the Company by check mailed to the Person entitled thereto as shown on
the security register. The Senior Notes are issued only in fully registered form
without coupons, in denominations of $1,000 and any integral multiple thereof.
No service charge will be made for any registration of transfer, exchange or
redemption of Senior Notes, except in certain circumstances for any tax or other
governmental charge that may be imposed in connection therewith.
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OPTIONAL REDEMPTION
The Senior Notes are subject to redemption at any time on or after July 15,
2001, at the option of the Company, in whole or in part, on not less than 30 nor
more than 60 days' prior notice in amounts of $1,000 or an integral multiple
thereof at the following redemption prices (expressed as percentages of the
principal amount), if redeemed during the 12-month period beginning July 15 of
the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
<S> <C>
2001............................................................................. 104.438%
2002............................................................................. 102.219%
2003............................................................................. 100.000%
</TABLE>
and thereafter at 100% of the principal amount, in each case together with
accrued and unpaid interest and Liquidated Damages, if any, to the redemption
date (subject to the right of holders of record on relevant record dates to
receive interest due on an interest payment date).
In addition, up to 35% of the aggregate principal amount of the Senior Notes
outstanding on the date of the Indenture are redeemable on or prior to July 15,
2000, at the option of the Company, with the net proceeds from the sale of
Qualified Capital Stock in one or more offerings after the date of the
Indenture, within 60 days of receipt of such proceeds, on not less than 30 nor
more than 60 days' prior notice, in amounts of $1,000 or an integral multiple
thereof, at a redemption price equal to 108 7/8% of the principal amount,
together with accrued and unpaid interest and Liquidated Damages, if any, to the
date of redemption.
The Senior Notes are subject to redemption, at the option of the Company,
prior to July 15, 2001, in whole or in part, at any time within 90 days after a
Change of Control on not less than 30 nor more than 60 days' prior notice to
each holder of Senior Notes to be redeemed in amounts of $1,000 or an integral
multiple thereof, at a redemption price equal to the sum of (i) the principal
amount thereof plus (ii) accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date plus (iii) the Applicable Premium.
If less than all of the Senior Notes are to be redeemed in the case of any
foregoing redemptions, the Trustee shall select the Senior Notes or the portion
thereof to be redeemed pro rata, by lot or by any other method the Trustee shall
deem fair and reasonable.
SINKING FUND
The Senior Notes are not entitled to the benefit of any sinking fund.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any
of its Subsidiaries to, create, issue, assume, guarantee, or otherwise in any
manner become directly or indirectly liable for or with respect to or otherwise
incur (collectively, "incur") any Indebtedness (including any Acquired
Indebtedness but excluding any Permitted Indebtedness); PROVIDED however that
the Company and any Subsidiary that is a Guarantor may incur Indebtedness if the
Consolidated Fixed Charge Coverage Ratio for the Company for the four full
fiscal quarters immediately preceding the incurrence of such Indebtedness taken
as one period (and after giving pro forma effect to (i) the incurrence of such
Indebtedness and (if applicable) the application of the net proceeds therefrom,
including to refinance other Indebtedness, as if such Indebtedness were
incurred, and the application of such proceeds occurred, at the beginning of
such four-quarter period; (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company and its Subsidiaries since the first day of
such four-quarter period as if such Indebtedness was
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incurred, repaid or retired at the beginning of such four-quarter period (except
that, in making such computation, the amount of Indebtedness under any revolving
credit facility shall be computed based upon the average daily balance of such
Indebtedness during such four-quarter period); (iii) in the case of Acquired
Indebtedness, the related acquisition (as if such acquisition had been
consummated on the first day of such four-quarter period); and (iv) any
acquisition or disposition by the Company and its Subsidiaries of any company or
any business or any assets out of the ordinary course of business, whether by
merger, stock purchase or sale, or asset purchase or sale or any related
repayment of Indebtedness, in each case since the first day of such four-quarter
period, (as if such acquisition or disposition had been consummated on the first
day of such four-quarter period) is equal to or greater than 2.0:1.0.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not
permit any Subsidiary to,
directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to holders
of, Capital Stock of the Company (other than dividends or distributions
payable in shares of Qualified Capital Stock of the Company or in options,
warrants or other rights to acquire such Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value, directly
or indirectly, any Capital Stock of the Company or any Capital Stock of any
Affiliate of the Company (other than Capital Stock of any Subsidiary) or
options, warrants or other rights to acquire such Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, any sinking fund payment or maturity, any Subordinated
Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital Stock of
any Subsidiary to any Person (other than (x) with respect to any Capital
Stock held by the Company or any of its Wholly Owned Subsidiaries or (y)
with respect to Capital Stock held by any other Person made on a pro rata
basis consistent with the ownership interests in such Capital Stock to the
owners of such Capital Stock);
(v) incur, create or assume any guarantee of Indebtedness of any
Affiliate of the Company (other than a Wholly Owned Subsidiary of the
Company); or
(vi) make any Investment in any Person (other than any Permitted
Investments);
(any of the payments described in paragraphs (i) through (vi) above, other than
any such action that is a Permitted Payment, collectively, "Restricted
Payments") unless at the time of and after giving effect to the proposed
Restricted Payment (the amount of any such Restricted Payment, if other than
cash, as determined by the Board of Directors, whose determination shall be
conclusive and evidenced by a board resolution), (1) no Default or Event of
Default shall have occurred and be continuing; (2) immediately before and
immediately after giving effect to such transaction on a pro forma basis, the
Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the provisions described under "--Limitation on
Indebtedness"; and (3) the aggregate amount of all such Restricted Payments
declared or made after the date of the Indenture does not exceed the sum of:
(A) $30,000,000;
(B) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on the
first day of the Company's fiscal quarter commencing prior to the date of
the Indenture and ending on the last day of the Company's last fiscal
quarter ending prior to the date of the Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss);
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of its
Subsidiaries) of its Qualified Capital Stock or any
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option, warrants or rights to purchase such Qualified Capital Stock of the
Company (except, in each case, to the extent such proceeds are used to
purchase, redeem or otherwise retire Capital Stock or Subordinated
Indebtedness as set forth below);
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Subsidiaries) upon the
exercise of any options or warrants to purchase Qualified Capital Stock of
the Company; and
(E) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from debt securities or Redeemable Capital Stock
that have been converted into or exchanged for Qualified Capital Stock of
the Company to the extent such debt securities or Redeemable Capital Stock
are originally sold for cash plus the aggregate Net Cash Proceeds received
by the Company at the time of such conversion or exchange.
(b) Notwithstanding the foregoing, and in the case of clauses (ii), (iii),
(iv) and (v) below, so long as there is no Default or Event of Default
continuing, the foregoing provisions shall not prohibit the following actions
(clauses (i) through (v) being referred to as a "Permitted Payment"):
(i) the payment of any dividend or distribution within 60 days after the
date of declaration thereof, if at such date of declaration such payment
would be permitted by the provisions of paragraph (a) of this Section and
such payment shall be deemed to have been paid on such date of declaration
for purposes of the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption or other acquisition or retirement of
any shares of Capital Stock of the Company in exchange for (including any
such exchange pursuant to the exercise of a conversion right or privilege in
connection therewith cash is paid in lieu of the issuance of fractional
shares or scrip), or out of the Net Cash Proceeds of, a substantially
concurrent issue and sale for cash (other than to a Subsidiary) of other
Qualified Capital Stock of the Company; PROVIDED that the Net Cash Proceeds
from the issuance of such shares of Qualified Capital Stock are excluded
from clause (3)(C) of paragraph (a) of this Section;
(iii) any repurchase, redemption, defeasance, retirement or acquisition
for value or payment of principal of any Subordinated Indebtedness in
exchange for, or out of the net proceeds of, a substantially concurrent
issuance and sale for cash (other than to any Subsidiary of the Company) of
any Qualified Capital Stock of the Company; PROVIDED that the Net Cash
Proceeds from the issuance of such Qualified Capital Stock are excluded from
clause (3)(C) of paragraph (a) of this Section; and
(iv) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (a "refinancing") through
the issuance of new Subordinated Indebtedness of the Company; PROVIDED that
any such new Subordinated Indebtedness (1) shall be in a principal amount
that does not exceed the principal amount so refinanced (or, if such old
Subordinated Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration or acceleration
thereof, then such lesser amount as of the date of determination), plus the
lesser of (I) the stated amount of any premium or other payment required to
be paid in connection with such a refinancing pursuant to the terms of the
Subordinated Indebtedness being refinanced or (II) the amount of premium or
other payment actually paid at such time to refinance the Subordinated
Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing; (2) has an Average Life to
Stated Maturity greater than the remaining Average Life to Stated Maturity
of the Senior Notes; (3) has a Stated Maturity for its final scheduled
principal payment later than the Stated Maturity for the final scheduled
principal payment of the Senior Notes; and (4) is expressly subordinated in
right of payment to the Senior Notes at least to the same extent as the
Indebtedness to be refinanced; and
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(v) the repurchase of the Senior Subordinated Notes pursuant to the
provisions of paragraph (c) of the covenant entitled "Limitation on Sale of
Assets" in the Senior Subordinated Note Indenture with Excess Proceeds but
only to the extent that the Company has already complied with the provisions
of paragraph (c) of the covenant entitled "--Limitation on Sale of Assets."
LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, enter into
or suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company (other than the Company or a Wholly
Owned Subsidiary) unless (i) such transaction or series of related transactions
is in writing on terms that are no less favorable to the Company or such
Subsidiary, as the case may be, than would be available in a comparable
transaction in arm's-length dealings with an unrelated third party and (ii) with
respect to any transaction or series of related transactions involving aggregate
payments in excess of $5,000,000, the Company delivers an officers' certificate
to the Trustee certifying that such transaction or series of related
transactions complies with clause (i) above and such transaction or series of
related transactions has been approved by a majority of the Disinterested
Directors of the Board of Directors; PROVIDED that any transaction or series of
related transactions otherwise permitted under this paragraph (other than any
transaction or series of related transactions with respect to the making of any
Permitted Investment pursuant to clause (viii) of the definition of "Permitted
Investment" or any Restricted Payment permitted pursuant to the covenant
entitled "--Limitation on Restricted Payments") pursuant to which the Company or
any Subsidiary of the Company shall receive or render value exceeding
$25,000,000 shall not be permitted unless, prior to the consummation of any such
transaction or series of related transactions, the Company shall have received
an opinion, from an independent nationally recognized investment banking firm or
firm experienced in the appraisal or similar review of similar types of
transactions, that such transaction is fair to the Company from a financial
point of view; PROVIDED, FURTHER, that this covenant shall not apply to (A) any
transaction with an officer or member of the Board of Directors of the Company
entered into in the ordinary course of business (including, without limitation,
the Company's 1994 Stock Option Plan and other compensation or employee benefit
arrangements with any officer or member of the Board of Directors of the
Company), (B) transactions or agreements in existence on the date of the
Indenture (and extensions or amendments thereof on terms which are not
materially less favorable to the Company than the terms of any such transaction
or agreement as in existence on the date of the Indenture), (C) directors' fees,
(D) any reasonable employment agreement approved by the Board of Directors of
the Company and entered into in the ordinary course of business of the Company
or any extensions thereof on substantially equivalent terms, (E) loans to
employees not exceeding $1,500,000 in the aggregate outstanding at any time, (F)
any employee benefit plan available to employees of the Company generally, and
(G) sales by the Company of its products in the ordinary course of business on
arm's-length terms.
(b) The Company will cause Playtex Investment Corp. not to amend, modify or
in any way alter the terms of the Agreement, dated as of November 5, 1991,
between Playtex Investment Corp. and Playtex Apparel Partners, L.P. in a manner
adverse to the Company or any Subsidiary.
LIMITATION ON LIENS. (a) The Company will not and will not permit any
Subsidiary to, create, incur, affirm or suffer to exist any Lien of any kind
(other than Permitted Liens) upon any property or assets (including any
intercompany notes) of the Company or any Subsidiary owned on the date of the
Indenture or acquired after the date of the Indenture, or any income or profits
therefrom, unless the Senior Notes are secured equally and ratably with (or
prior to in the case of Subordinated Indebtedness) the obligation or liability
secured by such Lien.
(b) Notwithstanding the foregoing, any security interest granted by the
Company or any Subsidiary to secure the Senior Notes pursuant to paragraph (a)
above shall provide by its terms that such security interest shall be
automatically and unconditionally released and discharged upon the release by
the holders of the obligation or liability of the Company or any Subsidiary
described in paragraph (a) above of their security interest (including any
deemed release upon payment in full of all obligations under such
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obligation or liability), at a time when (A) no other liability or obligation of
the Company or any Subsidiary has been secured by such property or assets of the
Company or any such Subsidiary, or (B) the holders of any such other liability
or obligation which is secured by such property or assets of the Company or any
such Subsidiary also release their security interest in such property or assets
(including any deemed release upon payment in full of all liabilities and
obligations).
LIMITATION ON SALE OF ASSETS. (a) The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, consummate an Asset Sale
unless (i) at least 85% of the proceeds from such Asset Sale are received in
cash; PROVIDED HOWEVER, that the amount of (A) any Senior Indebtedness (as shown
on the Company's or such Subsidiaries' most recent balance sheet or in the notes
thereto) of the Company or any such Subsidiary that are assumed by the
transferee of any asset in connection with any Asset Sale and (B) any deferred
payment obligations received by the Company or any such Subsidiary as proceeds
of an Asset Sale that are concurrently with the Asset Sale converted into cash
without recourse to the Company or any of its Subsidiaries, shall be deemed to
be cash for purposes of this provision and (ii) the Company or such Subsidiary
receives consideration at the time of such Asset Sale at least equal to the fair
market value of the shares or assets sold (as determined by the Board of
Directors of the Company and evidenced by a board resolution). Notwithstanding
the foregoing, clause (i) of the preceding sentence shall not apply to any Asset
Sale or portions thereof involving Excluded Assets or the making of any
Permitted Investment pursuant to clause (vii) of the definition of "Permitted
Investment" or any Restricted Payment permitted pursuant to the covenant
entitled "--Limitation on Restricted Payments."
(b) If all or a portion of the Net Cash Proceeds are not applied to prepay
or repay permanently any secured Senior Indebtedness then outstanding in
accordance with the terms thereof, or if no such secured Senior Indebtedness is
then outstanding, then the Company may within 12 months of the Asset Sale,
invest the Net Cash Proceeds in properties and assets that (as determined by the
Board of Directors) replace the properties and assets that were the subject of
the Asset Sale or in properties and assets that will be used in the businesses
of the Company or its Subsidiaries existing on the date of the Indenture or in a
business reasonably related thereto, which for purposes of the Indenture shall
include any consumer products business. The amount of such Net Cash Proceeds
neither used to permanently repay or prepay secured Senior Indebtedness nor used
or invested as set forth in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $25,000,000 or more,
the Company shall apply the Excess Proceeds to the repayment of the Senior Notes
and any Senior Indebtedness required to be repurchased under the instrument
governing such Senior Indebtedness as follows: (i) the Company shall make an
offer to purchase (an "Offer") from all holders of the Senior Notes in
accordance with the procedures set forth in the Indenture in the maximum
principal amount (expressed as a multiple of $1,000) of Senior Notes that may be
purchased out of an amount (the "Note Amount") equal to the product of such
Excess Proceeds multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Senior Notes, and the denominator of which
is the sum of the outstanding principal amount of the Senior Notes and such
Senior Indebtedness (subject to proration in the event such amount is less than
the aggregate Offered Price (as defined herein) of all Senior Notes tendered)
and (ii) to the extent required by such Senior Indebtedness to permanently
reduce the principal amount of such Senior Indebtedness, the Company shall make
an offer to purchase or otherwise repurchase or redeem Senior Indebtedness (a
"Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the
excess of the Excess Proceeds over the Note Amount; PROVIDED that in no event
shall the Pari Passu Debt Amount exceed the principal amount of such Senior
Indebtedness plus the amount of any premium required to be paid to repurchase
such Senior Indebtedness. The offer price shall be payable in cash in an amount
equal to 100% of the principal amount of the Senior Notes plus accrued and
unpaid interest and Liquidated Damages, if any, to the date (the "Purchase
Date") such Offer is consummated (the "Offered Price"), in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate Offered
Price of the Senior Notes tendered pursuant to the Offer is less than the Note
Amount relating thereto or the aggregate amount of Senior Indebtedness that is
purchased is less than the Pari Passu Debt Amount (the amount of such
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shortfall, if any, constituting a "Deficiency"), the Company shall use such
Deficiency in the business of the Company and its Subsidiaries. Upon completion
of the purchase of all the Senior Notes tendered pursuant to an Offer and
repurchase of the Senior Indebtedness pursuant to a Pari Passu Offer, the amount
of Excess Proceeds, if any, shall be reset at zero.
(d) Whenever the aggregate amount of Excess Proceeds received by the Company
exceeds $25,000,000, such Excess Proceeds shall, prior to the purchase of Senior
Notes or any Senior Indebtedness described in paragraph (c) above, be set aside
by the Company in a separate account pending (i) deposit with the depository or
a paying agent of the amount required to purchase the Senior Notes or Senior
Indebtedness tendered in an Offer or a Pari Passu Offer and (ii) delivery by the
Company of the Offered Price to the holders of the Senior Notes or Senior
Indebtedness tendered in an Offer or a Pari Passu Offer. Such Excess Proceeds
may be invested in Temporary Cash Investments; PROVIDED that the maturity date
of any such investment made after the amount of Excess Proceeds exceeds
$25,000,000 shall not be later than the Purchase Date. The Company shall be
entitled to any interest or dividends accrued, earned or paid on such Temporary
Cash Investments; PROVIDED that the Company shall not be entitled to such
interest and shall not withdraw such interest from the separate account, if an
Event of Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to paragraph
(c) above, the Senior Notes shall be purchased by the Company, at the option of
the holder thereof, in whole or in part in integral multiples of $1,000, on a
date that is not earlier than 30 days and not later than 60 days from the date
the notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act, subject to
proration in the event the Note Amount is less than the aggregate Offered Price
of all Senior Notes tendered.
(f) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws or regulations in connection with an Offer.
(g) The Company will not, and will not permit any Subsidiary to, create or
permit to exist or become effective any restriction (other than restrictions
existing under Indebtedness as in effect on the date of the Indenture as such
Indebtedness may be refinanced from time to time, PROVIDED that such
restrictions are no less favorable to the holders of Senior Notes than those
existing on the date of the Indenture) that would expressly impair the ability
of the Company to make an Offer to purchase the Senior Notes or, if such Offer
is made, to pay for the Senior Notes tendered for purchase.
PURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL. If a Change of Control
shall occur at any time, then each holder of Senior Notes shall have the right
to require that the Company purchase such holder's Senior Notes in whole or in
part in integral multiples of $1,000, at a purchase price (the "Change of
Control Purchase Price") in cash in an amount equal to 101% of the principal
amount of such Senior Notes, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase (the "Change of Control Purchase
Date"), pursuant to the offer described below (the "Change of Control Offer")
and the other procedures set forth in the Indenture.
Within 30 days following any Change of Control, the Company shall notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Senior Notes, by first-class mail, postage prepaid, at his address appearing
in the security register, stating, among other things, the purchase price and
that the purchase date shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such later date as is
necessary to comply with requirements under the Exchange Act; that any Senior
Note not tendered will continue to accrue interest; that, unless the Company
defaults in the payment of the purchase price, any Senior Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Purchase Date; and certain other procedures that a
holder of Senior Notes must follow to accept a Change of Control Offer or to
withdraw such acceptance.
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Any Change of Control under the Indenture constitutes a default under the
Credit Facilities. Therefore, upon the occurrence of a Change of Control, the
lenders under the Credit Facilities have the right to accelerate their loans and
the Company may be required to prepay all of its outstanding obligations under
the Credit Facilities (consisting of approximately $249.4 million of borrowings
on a pro forma basis as of June 28, 1997). See "Description of Certain
Indebtedness--Credit Facilities." Moreover, upon the occurrence of any Change of
Control, the Company will be required to make a similar change of control offer
under the Company's Senior Subordinated Notes. See "Description of Certain
Indebtedness--Senior Subordinated Notes."
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for any or all of the Senior Notes that might be delivered by
holders of the Senior Notes seeking to accept the Change of Control Offer and,
accordingly, none of the holders of the Senior Notes may receive the Change of
Control Purchase Price for their Senior Notes in the event of a Change of
Control. The failure of the Company to make or consummate the Change of Control
Offer or pay the Change of Control Purchase Price when due will give the Trustee
and the holders of the Senior Notes the rights described under "--Events of
Default."
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing law
of the Indenture) to represent a specific quantitative test. As a consequence,
in the event the holders of the Senior Notes elected to exercise their rights
under the Indenture and the Company elected to contest such election, there
could be no assurance as to how a court interpreting New York law would
interpret the phrase.
The existence of a holder's right to require the Company to repurchase such
holder's Senior Notes upon a Change of Control may deter a third party from
acquiring the Company in a transaction which constitutes a Change of Control.
Furthermore, the possibility that a third party would be deterred from acquiring
the Company may have an adverse effect on the market price of the Company's
Common Stock.
The provisions of the Indenture may not afford holders of Senior Notes the
right to require the Company to repurchase the Senior Notes in the event of a
highly leveraged transaction or certain transactions with the Company's
management or its affiliates, including a reorganization, restructuring, merger
or similar transaction (including, in certain circumstances, an acquisition of
the Company by their respective managements or affiliates) involving the Company
that may adversely affect holders of the Senior Notes, if such transaction is
not a transaction defined as a Change of Control. Reference is made to
"--Certain Definitions" for the definition of "Change of Control." A transaction
involving the Company's management or its affiliates, or a transaction involving
a recapitalization of the Company, may result in a Change of Control if it is
the type of transaction specified by such definition.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulation in connection with a Change of Control Offer.
LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF SUBSIDIARIES. The
Company will not permit (a) any Subsidiary to issue any Capital Stock (other
than to the Company or any Wholly Owned Subsidiary that is a Guarantor) or (b)
any Person (other than the Company or a Wholly Owned Subsidiary that is a
Guarantor) to acquire any Capital Stock of any Subsidiary from the Company or
any Wholly Owned Subsidiary, except upon the sale of all of the outstanding
Capital Stock of such Subsidiary owned by the Company.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
to (a) pay dividends or make any other distribution on its Capital Stock to the
Company or any other Subsidiary, (b) pay any Indebtedness owed to the Company or
any Subsidiary, (c) make any Investment in the
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Company or (d) transfer any of its properties or assets to the Company or any
Subsidiary, except (i) any encumbrance or restriction pursuant to the Credit
Facilities as in effect on the date of the Indenture or any other agreement in
effect on the date of the Indenture, (ii) any encumbrance or restriction, with
respect to a Subsidiary that is not a Subsidiary of the Company on the date of
the Indenture, in existence at the time such Person becomes a Subsidiary of the
Company and not incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of the Company or any
Subsidiary, (iv) any encumbrance or restriction contained in a working capital
facility permitted to be incurred pursuant to paragraph (xi) of the definition
of "Permitted Indebtedness" and (v) any encumbrance or restriction existing
under any agreement that extends, renews, refinances or replaces the agreements
containing the encumbrances or restrictions in the foregoing clauses (i) and
(ii), PROVIDED that the terms and conditions of any such encumbrances or
restrictions are not materially less favorable to the holders of the Senior
Notes than those under or pursuant to the agreement evidencing the Indebtedness
so extended, renewed, refinanced or replaced.
PROVISION OF FINANCIAL STATEMENTS. Whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Sections 13(a) or 15(d) if the
Company were so subject, such documents to be filed with the Commission on or
prior to the respective dates (the "Required Filing Dates") by which the Company
would have been required so to file such documents if the Company were so
subject. The Company will also in any event (x) within 15 days of each Required
Filing Date (i) transmit by mail to all holders of Senior Notes, as their names
and addresses appear in the security register, without cost to such holders of
Senior Notes and (ii) file with the Trustee copies of the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act if the Company was subject to such Sections and (y) if filing such documents
by the Company with the Commission is not permitted under the Exchange Act,
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective holder of
Senior Notes at the Company's cost.
ADDITIONAL COVENANTS. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in the City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate and
Company existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) maintenance of insurance.
CONSOLIDATION, MERGER, SALE OF ASSETS
The Company shall not, in a single transaction or a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets to any Person or group of affiliated Persons, or
permit any of its Subsidiaries to enter into any such transaction or
transactions if such transaction or transactions, in the aggregate, would result
in a sale, assignment, conveyance, transfer, lease or disposition of all or
substantially all of the properties and assets of the Company and its
Subsidiaries on a Consolidated basis to any other Person or group of affiliated
Persons, unless at the time and after giving effect thereto (i) either (a) the
Company shall be the continuing corporation or (b) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, conveyance, transfer, lease or
disposition all or substantially all of the properties and assets of the Company
and its Subsidiaries on a Consolidated basis (the "Surviving Entity") shall be a
corporation, partnership, limited liability company or business trust duly
organized and validly existing under the laws of the United States of America,
any state thereof or the District of Columbia and such Person assumes by a
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supplemental indenture in a form reasonably satisfactory to the Trustee, all the
obligations of the Company under the Senior Notes and the Indenture, and the
Indenture shall remain in full force and effect; (ii) immediately before and
immediately after giving effect to such transaction on a pro forma basis, no
Default or Event of Default shall have occurred and be continuing; (iii)
immediately before and immediately after giving effect to such transaction on a
pro forma basis (on the assumption that the transaction occurred on the first
day of the four-quarter period immediately prior to the consummation of such
transaction with the appropriate adjustments with respect to the transaction
being included in such pro forma calculation), the Company (or the Surviving
Entity if the Company is not the continuing obligor under the Indenture) could
incur $1.00 of additional Indebtedness under the provisions of "--Certain
Covenants--Limitation on Indebtedness" (other than Permitted Indebtedness); (iv)
each Guarantor unless it is the other party to the transactions described above,
shall have by supplemental indenture confirmed that its Guarantee shall apply to
such Person's obligations under the Indenture and the Senior Notes; (v) if any
of the property or assets of the Company or any of its Subsidiaries would
thereupon become subject to any Lien, the provisions of "--Certain
Covenants--Limitation on Liens" are complied with; and (vi) the Company or the
Surviving Entity shall have delivered, or caused to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, lease or other transaction
and the supplemental indenture in respect thereto comply with the provisions
described herein and that all conditions precedent herein provided for relating
to such transaction have been complied with.
Each Guarantor shall not, and the Company will not permit a Guarantor to, in
a single transaction or series of related transactions, merge or consolidate
with or into any other corporation (other than the Company or any other
Guarantor) or other entity, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets on a
Consolidated basis to any entity (other than the Company or any other Guarantor)
unless at the time and after giving effect thereto: (i) either (a) such
Guarantor shall be the continuing corporation or (b) the entity (if other than
such Guarantor) formed by such consolidation or into which such Guarantor is
merged or the entity which acquires by sale, assignment, conveyance, transfer,
lease or disposition the properties and assets of such Guarantor shall be a
corporation, partnership, limited liability company or business trust duly
organized and validly existing under the laws of the United States, any state
thereof or the District of Columbia and shall expressly assume by a supplemental
indenture, executed and delivered to the Trustee, in a form reasonably
satisfactory to the Trustee, all the obligations of such Guarantor under the
Senior Notes and the Indenture; (ii) immediately before and immediately after
giving effect to such transaction on a pro forma basis, no Default or Event of
Default shall have occurred and be continuing; and (iii) such Guarantor shall
have delivered to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, conveyance, transfer, lease
or disposition and such supplemental indenture comply with the Indenture, and
thereafter all obligations of the predecessor shall terminate.
Notwithstanding the foregoing, the Indenture will provide that in the event
of a sale or other disposition of all or substantially all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of such Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) shall
be released and relieved of any obligations under its Guarantee.
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In the event of any transaction described in and complying with the
conditions listed in the immediately preceding paragraphs in which the Company
or any Guarantor is not the continuing corporation, the successor Person formed
or remaining shall succeed to, and be substituted for, and may exercise every
right and power of, the Company or such Guarantor, as the case may be, and the
Company or such Guarantor, as the case may be, would be discharged from all
obligations and covenants under the Indenture, the Senior Notes and such
Guarantee, as the case may be; PROVIDED that in the case of a transfer by lease,
the predecessor shall not be released from the payment of principal and interest
on the Senior Notes or such Guarantee, as the case may be.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that all Subsidiaries of the Company (other than
Foreign Subsidiaries) shall be Guarantors. In addition, the Company will not,
and will not permit any of the Guarantors to, make any Investment in any
Subsidiary that is not a Guarantor unless either (i) such Investment is
permitted by the covenant entitled "Certain Covenants--Limitation on Restricted
Payments" or (ii) such Subsidiary executes a Guarantee and delivers an opinion
of counsel in accordance with the provisions of the Indenture.
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on, or
Liquidated Damages with respect to, any Senior Note when it becomes due and
payable, and such default shall continue for a period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Senior Note when and as the same shall become due
and payable at Maturity (upon acceleration, optional or mandatory
redemption, required repurchase or otherwise);
(iii) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under the Indenture
(other than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with in paragraphs (i) or (ii) or in
clauses (b) and (c) of this paragraph (iii)) and such default or breach
shall continue for a period of 30 days after written notice has been given,
by certified mail, (x) to the Company by the Trustee or (y) to the Company
and the Trustee by the holders of at least 25% in aggregate principal amount
of the outstanding Senior Notes; (b) there shall be a default in the
performance or breach of the provisions described in "--Consolidation,
Merger, Sale of Assets"; or (c) the Company shall have failed to make or
consummate a Change of Control Offer in accordance with the provisions of
"--Certain Covenants--Purchase of Senior Notes Upon a Change of Control;"
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company, any Guarantor or any
Subsidiary then has outstanding Indebtedness in excess of $25,000,000 in the
aggregate and, if not already matured at its final maturity in accordance
with its terms, such Indebtedness shall have been accelerated;
(v) any Guarantee shall for any reason cease to be, or be asserted in
writing by any Guarantor or the Company not to be, in full force and effect,
enforceable in accordance with its terms, except to the extent contemplated
by the Indenture and any such Guarantee;
(vi) one or more final judgments, orders or decrees for the payment of
money in excess of $15,000,000, either individually or in the aggregate,
shall be entered against the Company or any Subsidiary or any of their
respective properties and shall not be discharged and either (a) enforcement
proceedings shall have been commenced upon such judgment, order or decree or
(b) there shall have
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been a period of 60 consecutive days during which a stay of enforcement of
such judgment or order, by reason of an appeal or otherwise, shall not be in
effect;
(vii) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Guarantor or any Material Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or (b) a decree or order
adjudging the Company or any Guarantor or any Material Subsidiary bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, any Guarantor or any Material
Subsidiary under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company, any Guarantor or any Material Subsidiary or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and any such decree or order for relief shall continue to be
in effect, or any such other decree or order shall be unstayed and in
effect, for a period of 60 consecutive days; or
(viii) (a) the Company, any Guarantor or any Material Subsidiary commences
a voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent, (b) the
Company, any Guarantor or any Material Subsidiary consents to the entry of a
decree or order for relief in respect of the Company, such Guarantor or such
Material Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, (c) the Company, any Guarantor or
any Material Subsidiary files a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, (d) the
Company, any Guarantor or any Material Subsidiary (x) consents to the filing
of such petition or the appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company, any Guarantor or such Material Subsidiary or of any
substantial part of its property, (y) makes an assignment for the benefit of
creditors or (z) admits in writing its inability to pay its debts generally
as they become due or (e) the Company, any Guarantor or any Material
Subsidiary takes any corporate action in furtherance of any such actions in
this paragraph (viii).
If any Event of Default (other than as specified in paragraphs (vii) and
(viii) of the prior paragraph with respect to the Company) shall occur and be
continuing, the trustee or the holders of not less than 25% in aggregate
principal amount of the Senior Notes then outstanding may declare the Senior
Notes due and payable immediately at their principal amount together with
accrued and unpaid interest, if any, to the date the Senior Notes shall have
become due and payable by a notice in writing to the Company (and to the Trustee
if given by the holders of the Senior Notes) and thereupon the Trustee may, at
its discretion, proceed to protect and enforce the rights of the holders of
Senior Notes by appropriate judicial proceeding. If an Event of Default
specified in clause (vii) or (viii) of the prior paragraph occurs with respect
to the Company and is continuing, then all the Senior Notes shall IPSO FACTO
become and be immediately due and payable, in an amount equal to the principal
amount of the Senior Notes, together with accrued and unpaid interest, if any,
to the date the Senior Notes become due and payable, without any declaration or
other act on the part of the Trustee or any holder.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Senior Notes outstanding, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if (a) the Company has paid or deposited with the Trustee a
sum sufficient to pay (i) all sums paid or advanced by the Trustee and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel and any other amounts due to the Trustee under the
Indenture, (ii) all overdue interest on all Senior Notes, (iii) the principal of
and premium, if any, on any Senior Notes which have become due otherwise than by
such declaration of acceleration and interest thereon at the rate borne by the
Senior Notes and (iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Senior Notes; and (b)
all Events of Default, other
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than the non-payment of principal of the Senior Notes which have become due
solely by such declaration of acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount of the
Senior Notes outstanding may on behalf of the holders of all the Senior Notes
waive any past defaults under the Indenture and its consequences, except a
default in the payment of the principal of, premium, if any, or interest on any
Senior Note, or in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each Senior
Note outstanding.
The Company is also required to notify the Trustee within five business days
of the occurrence of any Default.
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, to obtain payment
of claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions, PROVIDED that if it acquires any conflicting
interest it must eliminate such conflict upon the occurrence of an Event of
Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time (PROVIDED, that the Company
obtains all legal opinions and complies with all other requirements under the
Indenture), elect to have the obligations of the Company and any Guarantor
discharged with respect to the outstanding Senior Notes ("defeasance"). Such
defeasance means that the Company and any Guarantor shall be deemed to have paid
and discharged the entire indebtedness represented by the outstanding Senior
Notes, except for (i) the rights of holders of outstanding Senior Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Senior Notes when such payments are due, (ii) the
Company's obligations with respect to the Senior Notes concerning issuing
temporary Senior Notes, registration of Senior Notes, mutilated, destroyed, lost
or stolen Senior Notes, and the maintenance of an office or agency for payment
and money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee and (iv) the defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company and any Guarantor released with respect to
certain covenants (PROVIDED that the Company's obligations to pay interest,
Liquidated Damages, premium, if any, and principal on the Senior Notes under the
Indenture shall remain in full force and effect as long as the Senior Notes are
outstanding), that are described in the Indenture ("covenant defeasance") and
any omission to comply with such obligations shall not constitute a Default or
an Event of Default with respect to the Senior Notes. In the event covenant
defeasance occurs, certain events (not including non-payment, enforceability of
any Guarantee, bankruptcy and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Senior Notes.
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Senior Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of, premium,
if any, and interest and Liquidated Damages on the outstanding Senior Notes on
the Stated Maturity of such principal or installment of principal (or on any
date after July 15, 2001 (such date being referred to as the "Defeasance
Redemption Date"), if when exercising either defeasance or covenant defeasance,
the Company has delivered to the Trustee an irrevocable notice to redeem all of
the outstanding Senior Notes on the Defeasance Redemption Date); (ii) in the
case of defeasance, the Company shall have delivered to the Trustee an opinion
of independent counsel in the United States stating that (A) the Company has
received from, or there has been published
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by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that the holders of the outstanding Senior Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred; (iii) in the case of covenant defeasance, the
Company shall have delivered to the Trustee an opinion of independent counsel in
the United States to the effect that the holders of the outstanding Senior Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit or
insofar as clause (vii) or (viii) under the first paragraph under "--Events of
Default" are concerned, at any time during the period ending on the 91st day
after the date of deposit; (v) such defeasance or covenant defeasance shall not
cause the Trustee for the Senior Notes to have a conflicting interest with
respect to any securities of the Company or any Guarantor; (vi) such defeasance
or covenant defeasance shall not result in a breach or violation of, or
constitute a Default under, the Indenture or a breach or violation of any
provision of any agreement to which the Company or any Guarantor is a party or
by which it is bound; (vii) the Company shall have delivered to the Trustee an
opinion of independent counsel in the United States to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (viii) the Company shall have delivered
to the Trustee an officers' certificate stating that the deposit was not made by
the Company with the intent of preferring the holders of the Senior Notes or any
Guarantee over the other creditors of the Company or any Guarantor with the
intent of defeating, hindering, delaying or defrauding creditors of the Company,
any Guarantor or others; (ix) no event or condition shall exist that would
prevent the Company from making payments of the principal of, premium, if any,
and interest and Liquidated Damages on the Senior Notes on the date of such
deposit or at any time ending on the 91st day after the date of such deposit;
and (x) the Company shall have delivered to the Trustee an officers' certificate
and an opinion of independent counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Senior Notes, as expressly
provided for in the Indenture) as to all outstanding Senior Notes when (i)
either (a) all the Senior Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Senior Notes which have been replaced or paid and
Senior Notes for whose payment funds have been deposited in trust by the Company
and thereafter repaid to the Company or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) all Senior Notes not
theretofore delivered to the Trustee for cancellation (x) have become due and
payable, (y) will become due and payable at their Stated Maturity within one
year or (z) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and either the Company
or any Guarantor has irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust an amount sufficient to pay and discharge the
entire indebtedness on the Senior Notes not theretofore delivered to the Trustee
for cancellation, including principal of, premium, if any, and accrued interest
and Liquidated Damages on such Senior Notes, at such Maturity, Stated Maturity
or redemption date; (ii) the Company and any Guarantor have paid or caused to be
paid all other sums payable under the Indenture by the Company or any Guarantor;
and (iii) the Company and any Guarantor have delivered to the Trustee an
officers' certificate and an opinion of counsel in the United States each
stating that all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with, and that
such satisfaction and discharge will not result in a breach or violation of, or
constitute a Default under, the
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Indenture or a breach or violation of any provision of any agreement to which
the Company or a Guarantor is a party or by which either is bound.
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company,
any Guarantor, if any, and the Trustee with the consent of greater than 50% of
the holders in aggregate outstanding principal amount of the Senior Notes;
PROVIDED, however that no such modification or amendment may, without the
consent of the holder of each outstanding Senior Note affected thereby: (i)
change the Stated Maturity of the principal of, or any installment of interest
on, any Senior Note or waive a default in the payment of the principal or
interest on any Senior Note or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof, or
change the coin or currency in which any Senior Note or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof; (ii) amend,
change or modify the obligation of the Company to make and consummate a Change
of Control Offer in the event of a Change of Control in accordance with
"--Certain Covenants--Purchase of Senior Notes Upon a Change of Control"; (iii)
reduce the percentage in principal amount of outstanding Senior Notes, the
consent of whose holders is required for any such supplemental indenture, or the
consent of whose holders is required for any waiver; (iv) modify any of the
provisions relating to supplemental indentures requiring the consent of holders
or relating to the waiver of past defaults or relating to the waiver of certain
covenants, except to increase the percentage of outstanding Senior Notes
required for such actions or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of each
Senior Note affected thereby; or (v) except as otherwise permitted under
"--Consolidation, Merger, Sale of Assets," consent to the assignment or transfer
by the Company or any Guarantor of any of its rights and obligations under the
Indenture.
The holders of greater than 50% in aggregate principal amount of the Senior
Notes outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
GOVERNING LAW
The Indenture and the Senior Notes are governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to the
conflicts of law principles thereof.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or the
date the acquired Person becomes a Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any other Person that
owns, directly or indirectly, 10% or more of such Person's equity ownership or
Voting Stock or any officer or director of any such Person or other Person or
with respect to any natural Person, any person having a relationship with such
Person by blood, marriage or adoption not more remote than first cousin. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person
directly or indirectly, whether through ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
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"Applicable Premium" means, with respect to any Senior Note to be redeemed,
the greater of (i) 1.0% of the then outstanding principal amount of such Senior
Note and (ii) (a) the sum of the present values, discounted for all full
semiannual periods at a discount rate equal to one-half multiplied by the
Treasury Rate plus 75 basis points (PROVIDED, HOWEVER, that the discount rate
for the period from the redemption date to the next interest payment date shall
equal the result of multiplying the Treasury Rate plus 75 basis points by the
Day Count Fraction), of (I) the remaining payments of interest on such Senior
Note and (II) the payment of the principal amount that, but for such redemption,
would have been payable on such Senior Note at Stated Maturity, MINUS (b) the
then outstanding principal amount of such Senior Note, MINUS (c) accrued and
unpaid interest paid on the redemption date.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction but not the grant of a pledge or security
interest) (collectively, a "transfer"), directly or indirectly, in one or a
series of related transactions, of (i) any Capital Stock of any Subsidiary; (ii)
all or substantially all of the properties and assets of any division or line of
business of the Company or any of its Subsidiaries; or (iii) any other
properties or assets (other than cash) of the Company or any Subsidiary, other
than in the ordinary course of business. For the purposes of this definition,
the term "Asset Sale" shall not include any transfer of properties and assets
(A) that is governed by the provisions described under "Consolidation, Merger,
Sale of Assets," (B) from any Subsidiary to the Company in accordance with the
terms of the Indenture, (C) having a market value of less than $1,000,000 (it
being understood that if the market value of the properties or assets being
transferred exceeds $1,000,000, the entire value and not just the portion in
excess of $1,000,000, shall be deemed to have been the subject of an Asset
Sale), (D) to any Wholly Owned Subsidiary which is a Guarantor, (E) which are
obsolete to the Company's and its Subsidiaries' businesses or (F) from any
Wholly Owned Subsidiary to any other Wholly Owned Subsidiary which is a
Guarantor.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Bankruptcy Law" means Title 11 of the United States Code, as amended, or
any similar United States federal or state law relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization or relief of
debtors or any amendment to, succession to or change in any such law.
"Canadian Subsidiary" means any Subsidiary organized under the laws of
Canada or any province thereof, a majority of the assets of which are located in
Canada.
"Capital Lease Obligation" of any Person means any obligations of such
Person under any capital lease of real or personal property which, in accordance
with GAAP, has been recorded as a capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity of
180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (PROVIDED that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) certificates of deposit or acceptances with a maturity of 180
days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500,000,000; (iii) commercial paper with a maturity of 180 days or
less issued by a corporation that is not an Affiliate of the Company organized
under the laws of any state of the United States or the District of Columbia and
rated A-1 (or higher) according to S&P or P-1 (or higher)
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according to Moody's or at least an equivalent rating category of another
nationally recognized securities rating agency; (iv) any money market deposit
accounts issued or offered by a domestic commercial bank having capital and
surplus in excess of $500,000,000; and (v) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of America or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within 180 days from the date of
acquisition.
"Change of Control" means the occurrence of any of the following events: (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), other than Permitted Holders, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have beneficial ownership of all shares that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 50% of
the Voting Stock of all classes of Voting Stock of the Company; (ii) the Company
consolidates with or merges with or into any Person or conveys, transfers or
leases all or substantially all of its assets to any Person, or any corporation
consolidates with or merges with or into the Company, in any such event pursuant
to a transaction in which the outstanding Voting Stock of the Company is changed
into or exchanged for cash, securities or other property, other than any such
transaction (1) where the outstanding Voting Stock of the Company is not changed
or exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company) or (2) where (A) the outstanding
Voting Stock of the Company is changed into or exchanged for (x) Voting Stock of
the surviving corporation or the Company which is not Redeemable Capital Stock
or (y) cash, securities and other property (other than Capital Stock of the
surviving corporation) in an amount which could be paid by the Company as a
Restricted Payment as described under "Certain Covenants-- Limitation on
Restricted Payments" (and such amount shall be treated as a Restricted Payment
subject to the provisions in the Indenture described under "Certain
Covenants--Limitation on Restricted Payments") and (B) no "person" or "group"
other than Permitted Holders owns immediately after such transaction, directly
or indirectly, more than 50% of the total outstanding Voting Stock of the
surviving corporation, or (iii) the Company is liquidated or dissolved or adopts
a plan of liquidation or dissolution other than in a transaction which complies
with the provisions described under "--Consolidation, Merger, Sales of Assets."
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, as applied
to any Person, the ratio of (a) the sum of Consolidated Net Income, Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash
Charges deducted in computing Consolidated Net Income (Loss) in each case, for
such period, of such Person and its subsidiaries on a Consolidated basis, all
determined in accordance with GAAP to (b) the sum of Consolidated Interest
Expense for such period and cash and non-cash dividends (other than any such
non-cash dividends in the form of Qualified Capital Stock which does not provide
for the payment of cash dividends prior to any Stated Maturity of the principal
of the Senior Notes) paid on any Preferred Stock of such Person during such
period; PROVIDED that (i) in making such computation, the Consolidated Interest
Expense attributable to interest on any Indebtedness computed on a pro forma
basis and (A) bearing a floating interest rate shall be computed as if the rate
in effect on the date of computation had been the applicable rate for the entire
period and (B) which was not outstanding during the period for which the
computation is being made but which bears,
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at the option of such Person, a fixed or floating rate of interest, shall be
computed by applying, at the option of such Person, either the fixed or floating
rate and (ii) in making such computation, the Consolidated Interest Expense of
such Person attributable to interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period.
"Consolidated Income Tax Expense" means for any period, as applied to any
Person, the provision for federal, state, local and foreign income taxes of such
Person and its Consolidated subsidiaries for such period are determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, as applied to any Person, the sum of (a) the interest expense of
such Person and its Consolidated subsidiaries for such period, on a Consolidated
basis, including, without limitation, (i) amortization of debt discount, (ii)
the net cost under interest rate contracts (including amortization of
discounts), (iii) the interest portion of any deferred payment obligation and
(iv) accrued interest, plus (b)(i) the interest component of Capital Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
during such period and (ii) all capitalized interest of such Person and its
Consolidated subsidiaries, in each case as determined in accordance with GAAP.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Consolidated
subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such Consolidated net income (or loss), by
excluding, without duplication, (i) all extraordinary gains and losses, (ii) the
portion of Consolidated net income (or loss) of such Person and its Consolidated
subsidiaries allocable to minority interests in unconsolidated Persons to the
extent that cash dividends or distributions have not actually been received by
such Person or one of its Consolidated subsidiaries, (iii) net income (or loss)
of any Person combined with such Person or any of its subsidiaries on a "pooling
of interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss, net of taxes, realized upon the termination of any
employee pensions benefit plan, (v) aggregate net gains (less all fees and
expenses relating thereto) in respect of dispositions of assets other than in
the ordinary course of business, (vi) the net income of any subsidiary to the
extent that the declaration of dividends or similar distributions by that
subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
subsidiary or its stockholders, (vii) all non-cash interest income arising from
Indebtedness owed to the Company or any of its Subsidiaries from Playtex Apparel
Partners, L.P. (net of any non-cash interest expense arising from Indebtedness
in existence on the date of the Indenture or any refinancings thereof (or any
pay-in-kind obligation issued pursuant to the terms thereof) owed by the Company
or any of its Subsidiaries to Playtex Apparel Partners, L.P. or its partners or
their transferees), (viii) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of income
accrued at any time following the date of the Indenture, (ix) any net gain from
the collection of proceeds of life insurance policies or (x) any gain arising
from the acquisition of any securities, or the extinguishment, under GAAP, of
any Indebtedness of such Person.
"Consolidated Net Worth" of any Person means the Consolidated stockholders'
equity (excluding Redeemable Capital Stock) of such Person and its subsidiaries,
as determined in accordance with GAAP.
"Consolidated Non-Cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Consolidated subsidiaries for such period, as determined in accordance
with GAAP (excluding any non-cash charge which requires an accrual or reserve
for cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries
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would normally be consolidated with those of such Person, all in accordance with
GAAP. The term "Consolidated" shall have a similar meaning.
"Credit Facilities" means (a) the Credit Agreement among the Company, the
several lenders from time to time parties thereto, DLJ Capital Funding, Inc. and
the agent thereunder and (b) the Term Loan Agreement among the Company, the
several banks and other financial institutions from time to time parties
thereto, DLJ Capital Funding, Inc., and the facility manager thereunder, to be
entered into simultaneously with consummation of the Offering, as each and as
such agreement may be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented or otherwise modified from time to time
(including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing).
"Day Count Fraction" means the number of days from the redemption date to
(but not excluding) the next scheduled interest payment date divided by 360
(which assumes a 360-day year composed of twelve 30-day months).
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series of
related transactions, a member of the Board of Directors who does not have any
material direct or indirect financial interest in or with respect to such
transaction or series of related transactions.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" means the assets and other property held by the Company
(including shares of Capital Stock) relating to the Jhirmack Business.
"Foreign Subsidiary" means any Subsidiary organized in a jurisdiction
outside one of the States of the United States or the District of Columbia.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect on the date of the Indenture.
"Guarantee" means the guarantee by any Guarantor of the Indenture
Obligations.
"Guaranteed Debt" of any Person means, without duplication, all Indebtedness
of any other Person referred to in the definition of Indebtedness contained in
this Section guaranteed directly or indirectly in any manner by such Person, or
in effect guaranteed directly or indirectly by such Person through an agreement
(i) to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (iii) to supply funds to, or in
any other manner invest in, the debtor (including any agreement to pay for
property or services without requiring that such property be received or such
services be rendered), (iv) to maintain working capital or equity capital of the
debtor, or otherwise to maintain the net worth, solvency or other financial
condition of the debtor or (v) otherwise to assure a creditor against loss;
PROVIDED that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Guarantor" means any guarantor of the Senior Notes, including, without
limitation, Playtex Beauty Care, Inc., Playtex Investment Corp., Playtex
International Corp., Playtex Sales & Services, Inc., Playtex Manufacturing,
Inc., Smile-Tote, Inc., Sun Pharmaceuticals Corp. and T H Marketing Corp.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade
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payables and other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit issued under
letter of credit facilities, acceptance facilities or other similar facilities
and in connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, now or thereafter outstanding,
(ii) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (iv) all obligations under Interest Rate Agreements of such Person,
(v) all Capital Lease Obligations of such Person, (vi) all Indebtedness referred
to in clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect or property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness, (vii) all
Guaranteed Debt of such Person, (viii) all Redeemable Capital Stock valued at
the greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends, and (ix) any amendment, supplement, modification,
deferral, renewal, extension, refunding or refinancing of any Indebtedness of
the types referred to in clauses (i) through (viii) above. For purposes hereof,
the "maximum fixed repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by, the
fair market value of such Redeemable Capital Stock, such fair market value to be
determined in good faith by the Board of Directors of such Person.
"Indenture" means the Indenture, dated as of July 21, 1997, relating to the
Senior Notes among the Company, the Guarantors and Marine Midland Bank, as
Trustee.
"Indenture Obligations" means the obligations of the Company under the
Indenture or under the Senior Notes to pay principal of, premium, if any, and
interest when due and payable, and all other amounts due or to become due under
or in connection with the Indenture, the Senior Notes and the performance of all
other obligations to the Trustee and the holders under the Indenture and the
Senior Notes, according to the terms thereof.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
"Investment" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees), or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase, acquisition or ownership by such Person of any Capital Stock, bonds,
notes, debentures or other securities issued or owned by, any other Person and
all other items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP.
"Jhirmack Business" means the assets and liabilities of the Company and its
Subsidiaries relating to Jhirmack hair care products, including the Capital
Stock of any Subsidiary, substantially all of the assets and liabilities of
which relate to Jhirmack hair care products.
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"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
security interest, hypothecation or other encumbrance upon or with respect to
any property of any kind, real or personal, movable or immovable, now owned or
hereafter acquired.
"Marketing Corporation" means Playtex Marketing Corporation, a Delaware
corporation, or its successors.
"Material Subsidiary" means each Subsidiary of the Company which (i) for the
most recent fiscal year of the Company accounted for more than 10% of the
Consolidated revenues of the Company and its Subsidiaries or (ii) at the end of
such fiscal year, was the owner (beneficial or otherwise) of more than 10% of
the Consolidated Assets of the Company and its Subsidiaries, all as shown on the
Company's Consolidated financial statements for such fiscal year. In addition,
Marketing Corporation shall be deemed to be a "Material Subsidiary."
"Maturity" when used with respect to any Senior Note means the date on which
the principal of such Senior Note becomes due and payable as therein provided or
as provided in the Indenture, whether at Stated Maturity, the Purchase Date or
the redemption date and whether by declaration of acceleration, Offer in respect
of Excess Proceeds, Change of Control, call for redemption or otherwise.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any Person,
the proceeds thereof in the form of cash or Cash Equivalents including payments
in respect of deferred payment obligations when received in the form of, or
stock or other assets when disposed of for, cash or Cash Equivalents (except to
the extent that such obligations are financed or sold with recourse to the
Company or any Subsidiary) net of (i) brokerage commissions and other reasonable
fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a
result of such Asset Sale, (iii) payments made to retire Indebtedness where
payment of such Indebtedness is secured by the assets or properties the subject
of such Asset Sale, (iv) amounts required to be paid to any Person (other than
the Company or any Subsidiary) owning a beneficial interest in the assets
subject to the Asset Sale and (v) appropriate amounts to be provided by the
Company or any Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an officers' certificate delivered to the Trustee and (b) with
respect to any issuance or sale of Capital Stock or options, warrants or rights
to purchase Capital Stock, or debt securities or Capital Stock that have been
converted into or exchanged for Capital Stock, as referred to under "--Certain
Covenants--Limitation on Restricted Payments," the proceeds of such issuance or
sale in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations when received in the form of, or stock of other
assets when disposed of for, cash or Cash Equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any
Subsidiary), net of attorney's fees, accountant's fees and brokerage,
consultation, underwriting and other fees and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Permitted Holders" means each of (i) HWH Capital Partners, L.P., HWH
Valentine Partners, L.P., HWH Surplus Valentine Partners, L.P. (each a
"Partnership") or Haas Wheat & Partners Incorporated and any of their respective
Affiliates; (ii) any officer or other member of management employed by the
Company or any Subsidiary as of the date of the Indenture; (iii) Robert B. Haas
and Douglas D. Wheat; (iv) family members or relatives of the persons described
in clauses (ii) and (iii); (v) any trusts created for the benefit of the persons
described in clauses (ii), (iii) or (iv); (vi) in the event of the incompetence
or death of any of the persons described in clauses (ii), (iii) and (iv), such
person's estate, executor, administrator, committee or other personal
representatives or beneficiaries; and (vii) upon a distribution by a Partnership
of all or any of the stock of the Company, the limited partners of such
Partnership.
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"Permitted Indebtedness" means the following:
(i) Indebtedness of the Company under the Credit Facilities in an
aggregate principal amount at any one time outstanding not to exceed $320
million, reduced by (A) any scheduled principal payments actually made and
(B) any amounts by which any revolving credit facility commitment is
permanently reduced and the revolving credit loans, to the extent required,
are indefeasibly and irrevocably paid in cash;
(ii) Guarantees by, and Liens on the property of, any Subsidiary
guaranteeing or securing the Company's Indebtedness under the Credit
Facilities;
(iii) Indebtedness of the Company pursuant to the Senior Notes and
Indebtedness of any Guarantor pursuant to a Guarantee of the Senior Notes;
(iv) Indebtedness of the Company or any Subsidiary outstanding on the
date of the Indenture, including, without limitation, the Senior
Subordinated Notes;
(v) Indebtedness (a) of the Company owing to a Wholly Owned Subsidiary
which is a Guarantor or (b) of a Wholly Owned Subsidiary which is a
Guarantor owing to the Company or another Wholly Owned Subsidiary which is a
Guarantor; PROVIDED that any such Indebtedness is made pursuant to an
intercompany note and, in the case of Indebtedness of the Company owing to a
Subsidiary, is subordinated in right of payment from and after such time as
the Senior Notes shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Senior Notes; PROVIDED, FURTHER, that (x) any
disposition, pledge or transfer of any such Indebtedness to a Person (other
than the Company or a Wholly Owned Subsidiary which is a Guarantor) shall be
deemed to be an incurrence of such Indebtedness by the obligor not permitted
by this clause (v) and (y) any transaction pursuant to which any Wholly
Owned Subsidiary, which has Indebtedness owing to the Company or any other
Wholly Owned Subsidiary, ceases to be a Wholly Owned Subsidiary shall be
deemed to be the incurrence of Indebtedness by the Company or such other
Wholly Owned Subsidiary that is not permitted by this clause (v);
(vi) obligations of the Company or any Subsidiary pursuant to Interest
Rate Agreements designed to protect the Company or any Subsidiary against
fluctuations in interest rates in respect of Indebtedness of the Company or
any of its Subsidiaries, which obligations do not exceed the aggregate
principal amount of such Indebtedness;
(vii) trade and standby letters of credit issued for the account of the
Company or any Subsidiary of the Company in the ordinary course of its
business (excluding letters of credit described in clauses (viii) and (ix)
below);
(viii) letters of credit of up to $7,500,000 in the aggregate at any time
outstanding issued for the account of the Company or any Subsidiary of the
Company for any purpose other than in the ordinary course of business;
(ix) letters of credit issued for the account of the Company in support
of the Company's self-insurance obligations and in support of Indebtedness
under industrial revenue bonds, to the extent that such obligations or such
Indebtedness are recorded on the balance sheet of the Company;
(x) Capital Lease Obligations, industrial revenue bonds and Purchase
Money Obligations of the Company or any Subsidiary, not to exceed
$10,000,000 in the aggregate at any time outstanding;
(xi) Indebtedness of the Company or any Canadian Subsidiary incurred to
fund the working capital requirements necessary for the Canadian operations
of any Canadian Subsidiary in an amount not to exceed $10,000,000 in the
aggregate at any time outstanding;
(xii) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness
described in paragraphs (ii), (iii), (iv) and (xiii) of this
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definition of "Permitted Indebtedness," including any successive
refinancings so long as such refinancing does not increase the aggregate
principal amount of Indebtedness represented thereby plus the lesser of (I)
the stated amount of any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of the Indebtedness
being refinanced or (II) the amount of premium or other payment actually
paid at such time to refinance the Indebtedness, plus, in either case, the
amount of expenses of the Company incurred in connection with such
refinancing and, in the case of Senior Indebtedness or Subordinated
Indebtedness, such refinancing does not reduce the Average Life to Stated
Maturity or the Stated Maturity of such Indebtedness;
(xiii) guarantees by any Subsidiary which is a Guarantor given in
accordance with Section 1013 of the indenture governing the Senior
Subordinated Notes; and
(xiv) Indebtedness of the Company or any Subsidiary which is a Guarantor
in addition to that described in paragraphs (i) through (xiii) of this
definition of "Permitted Indebtedness" in an aggregate principal amount
outstanding at any given time not to exceed $50,000,000, which amount,
notwithstanding the provisions of paragraph (i) hereof, may be incurred
under the Credit Facilities.
"Permitted Investment" means (i) Investments in the Company or in any Wholly
Owned Subsidiary which is a Guarantor or Investments by the Company or any
Subsidiary in a Person, if as a result of such Investment (a) such Person
becomes a Wholly Owned Subsidiary which is a Guarantor or (b) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or any
Wholly Owned Subsidiary which is a Guarantor; (ii) Investments in the Senior
Notes and the Guarantees; (iii) Indebtedness owing to a Subsidiary described
under clause (v) of the definition of "Permitted Indebtedness"; (iv) Temporary
Cash Investments; (v) Investments acquired by the Company or any Subsidiary in
connection with an Asset Sale permitted under "--Certain Covenants--Limitation
on Sale of Assets" to the extent such Investments are non-cash consideration as
permitted under such covenant; (vi) Investments in existence on the date of the
Indenture; and (vii) in addition to the Investments described in clauses (i)
through (vi) of this definition of "Permitted Investments," Investments in any
Subsidiary, Unrestricted Subsidiary or in any joint venture or other entity in
an amount not to exceed $35,000,000 in the aggregate since the date of the
Indenture.
"Permitted Liens" means (i) Liens securing Indebtedness under the Credit
Facilities, (ii) Liens for taxes, assessments or governmental charges or claims
that either (A) are not yet delinquent or (B) are being contested in good faith
by appropriate proceedings and as to which appropriate reserves have been
established or other provisions have been made in accordance with GAAP; (iii)
statutory Liens of landlords and carriers', warehousemen's, mechanics',
suppliers', materialmen's, repairmen's or other Liens imposed by law and arising
in the ordinary course of business and with respect to amounts that, to the
extent applicable, either (A) are not yet delinquent or (B) are being contested
in good faith by appropriate proceedings and as to which appropriate reserves
have been established or other provisions have been made in accordance with
GAAP; (iv) Liens on property of a Person existing at the time such Person is
merged into, consolidated with or acquired by the Company or any Subsidiary of
the Company which is a Guarantor; PROVIDED that such Liens were not incurred in
contemplation of such merger or consolidation and do not extend to any assets
other than those of (A) the Person merged into or consolidated with the Company
or any Subsidiary which is a Guarantor or (B) those of an unrelated third party;
(v) Liens on property existing at the time of acquisition thereof by the Company
or any Subsidiary of the Company which is Guarantor; PROVIDED that such Liens
were not incurred in contemplation of such acquisition; (vi) Liens existing on
the date of the Indenture; (vii) replacement Liens securing any Indebtedness
refinanced as permitted in clause (xii) of the definition of "Permitted
Indebtedness;" (viii) Liens arising under licensing agreements entered into by
the Company or any Subsidiary in the ordinary course of business for the use of
Intellectual Property (as defined in the Credit Facilities) or other intangible
assets of the Company or such Subsidiary, and settlements, permissions, consents
to use, and other similar agreements concerning Intellectual Property or
judgments adjudicating rights in Intellectual Property; (ix) Liens securing
Capital Lease Obligations, industrial revenue bonds and Purchase Money
Obligations
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permitted to be incurred under clause (x) of the definition of "Permitted
Indebtedness;" (x) Liens securing any Indebtedness of the Company or any
Subsidiary which is a Guarantor permitted to be incurred pursuant to clauses
(viii), (xi) and (xiv) of the definition of "Permitted Indebtedness;" (xi) Liens
(other than any Lien imposed by the Employer Retirement Income Security Act of
1974, as amended) incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security; (xii) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety and appeal
bonds, progress payments, government contracts and other obligations of like
nature (exclusive of obligations for the payment of borrowed money), in each
case, incurred in the ordinary course of business; (xiii) attachment or judgment
Liens not giving rise to a Default or an Event of Default; and (xiv) easements,
rights-of-way, restrictions and other similar charges or encumbrances not
materially interfering with the ordinary conduct of business of the Company or
any of its Subsidiaries.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivisions thereof.
"Preferred Stock" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company or its Subsidiaries, and any
additions and accessions thereto, which are purchased by the Company or any
Subsidiary at any time after the Senior Notes are issued; PROVIDED that (i) the
security agreement or conditional sales or other title retention contract
pursuant to which the Lien on such assets is created (collectively a "Purchase
Money Security Agreement") shall be entered into within 90 days after the
purchase or substantial completion of the construction of such assets and shall
at all times be confined solely to the assets so purchased or acquired, any
additions and accessions thereto and any proceeds therefrom, (ii) at no time
shall the aggregate principal amount of the outstanding Indebtedness secured
thereby be increased, except in connection with the purchase of additions and
accessions thereto and except in respect of fees and other obligations in
respect of such Indebtedness and (iii)(A) the aggregate outstanding principal
amount of Indebtedness secured thereby (determined on a per asset basis in the
case of any additions and accessions) shall not at the time such Purchase Money
Security Agreement is entered into exceed 100% of the purchase price to the
Company or any Subsidiary of the assets subject thereto or (B) the Indebtedness
secured thereby shall be with recourse solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its terms
or by the terms of any security into which it is convertible or exchangeable or
otherwise, is, or upon the happening of an event or passage of time would be,
required to be redeemed prior to any Stated Maturity of the principal of the
Senior Notes or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity at the option of
the holder thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means any Indebtedness which ranks PARI PASSU in right
of payment with, and which is not expressly by its terms subordinated in right
of payment of principal, interest or premium, if any, to the Senior Notes,
whether or not such Indebtedness is secured.
"Senior Subordinated Notes" means the Company's 9% Senior Subordinated Notes
due 2003.
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"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the dates specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest, as the case may be, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company subordinated
in right of payment to the Senior Notes, including, without limitation, the
Senior Subordinated Notes.
"Subsidiary" means any Person a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries; PROVIDED that an Unrestricted Subsidiary shall not be deemed
a Subsidiary for purposes of the Indenture.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof, and
guaranteed fully as to principal, premium, if any, and interest by the United
States of America, (ii) any certificate of deposit, maturing not more than one
year after the date of acquisition, issued by, or time deposit of, the Trustee
or a commercial banking institution that is a member of the Federal Reserve
System and that has combined capital and surplus and undivided profits of not
less than $500,000,000, whose debt has a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's Investors
Service, Inc. ("Moody's") or any successor rating agency or "A-1" (or higher)
according to Standard & Poor's Corporation ("S&P") or any successor rating
agency, (iii) commercial paper, maturing not more than one year after the date
of acquisition, issued by a corporation (other than an Affiliate or Subsidiary
of the Company) organized and existing under the laws of the United States of
America with a rating, at the time as of which any investment therein is made,
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P,
(iv) any money market deposit accounts issued or offered by the Trustee or a
domestic commercial bank having capital and surplus in excess of $500,000,000.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by, and
published in, the most recent Federal Reserve Statistical Release H.15 (5-19)
which has become publicly available at least two Business Days prior to the date
fixed for redemption of the Senior Notes following a Change of Control (or, if
such Statistical Release is no longer published, any publicly available source
of similar market data)) most nearly equal to the then remaining Average Life to
Stated Maturity of the Senior Notes; PROVIDED, HOWEVER, that if the Average Life
to Stated Maturity of the Senior Notes is not equal to the constant maturity of
a United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (rounded, if necessary,
to four decimal places) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Average Life to
Stated Maturity of the Senior Notes is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"Unrestricted Subsidiary" means any subsidiary that would but for this
definition of "Unrestricted Subsidiary" be a Subsidiary organized or acquired
after the date of the Indenture as to which all of the following conditions
apply: (a) neither the Company nor any of its other Subsidiaries (other than
Unrestricted Subsidiaries) provides credit support for any Indebtedness of such
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness); (b) such Subsidiary is not liable, directly or indirectly, with
respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness; (c)
neither the Company nor any of its Subsidiaries (other than Unrestricted
Subsidiaries) has made an Investment in such Unrestricted Subsidiary unless such
Investment was permitted by the provisions described under "--Certain
Covenants--Limitation on Restricted Payments"; and (d) the Board of Directors of
the Company, as provided below, shall have designated such Subsidiary (including
any newly formed or acquired Subsidiary) to be an Unrestricted Subsidiary;
PROVIDED that after giving effect to such
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designation, such Subsidiary does not own, directly or indirectly, any Capital
Stock of any other Subsidiary. Any such designation by the Board of Directors of
the Company shall be evidenced to the Trustee by filing with the Trustee a board
resolution giving effect to such designation and an officers' certificate
certifying that such designation complies with the foregoing conditions. The
Board of Directors of the Company may designate any Unrestricted Subsidiary as a
Subsidiary; PROVIDED that (i) immediately after giving pro forma effect to such
designation, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the restrictions under "--Certain
Covenants--Limitation on Indebtedness"; and (ii) all Indebtedness of such
Unrestricted Subsidiary shall be deemed to be incurred on the date such
Unrestricted Subsidiary becomes a Subsidiary. Any subsidiary of an Unrestricted
Subsidiary shall be an Unrestricted Subsidiary for purposes of the Indenture.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary (a) as to which neither the Company
nor any Subsidiary is directly or indirectly liable (by virtue of the Company or
any such Subsidiary being the primary obligor on, guarantor of, or otherwise
liable in any respect to, such Indebtedness), and (b) which, upon the occurrence
of a default with respect thereto, does not result in, or permit any holder of
any Indebtedness of the Company or any Subsidiary to declare, a default on such
Indebtedness of the Company or any Subsidiary or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the outstanding Capital
Stock (other than directors' qualifying shares) of which are owned by the
Company or another Wholly Owned Subsidiary.
BOOK-ENTRY; DELIVERY AND FORM
The Initial Notes were offered and sold to Qualified Institutional Buyers
(as defined) in reliance on Rule 144A ("Rule 144A Notes"). Initial Notes also
were offered and sold to Institutional Accredited Investors (as defined) in
transactions exempt from registration under the Securities Act not made in
reliance on Rule 144A or Regulation S ("Other Notes").
Exchange Notes issued in exchange for each of the Rule 144A Notes and Other
Notes initially will be represented by one or more Notes in registered, global
form without interest coupons (collectively, the "Global Notes"). The Global
Notes will be deposited upon issuance with the Trustee as custodian for The
Depository Trust Company ("DTC"), in New York, New York, and registered in the
name of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant as described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
Exchange Notes in certificated form except in the limited circumstances
described below. See "--Exchange of Book-Entry Senior Notes for Certificated
Senior Notes." In addition, transfers of beneficial interests in the Global
Notes will be subject to the applicable rules and procedures of DTC and its
direct or indirect participants, which may change from time to time.
The Exchange Notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
DEPOSITORY PROCEDURES. DTC has advised the Company that DTC is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of Participants. The Participants
include securities brokers and dealers (including the Initial Purchaser), banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and
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trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of Global Notes and (ii) ownership of such interests in Global Notes will
be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to Participants) or by
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Notes).
Investors in the Global Notes may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations that are Participants in such system. All interests in a Global
Note, including those held through Euroclear or Cedel, may be subject to the
procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of Participants, which in turn
act on behalf of Indirect Participants and certain banks, the ability of a
person having a beneficial interest in a Global Note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the Senior Notes, see "-- Exchange of Book-Entry Notes for
Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE SENIOR NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY
OF SENIOR NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED
OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal and premium and Liquidated Damages, if
any, and interest on a Global Note registered in the name of DTC or its nominee
will be payable by the Trustee to DTC or its nominee in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee will treat the persons in whose names the Senior Notes,
including the Global Notes, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes whatsoever.
Consequently neither the Company, the Trustee nor any agent of the Company or
the Trustee has or will have any responsibility or liability for (i) any aspect
of DTC's records or any Participant's or Indirect Participant's records relating
to or payments made on account of beneficial ownership interests in the Global
Notes, or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Notes or (ii) any other matter relating to the
actions and practices of DTC or any of its Participants or Indirect
Participants.
DTC has advised the Company that its current practices, upon receipt of any
payment in respect of securities such as the Senior Notes (including principal
and interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Notes as shown on the records of DTC. Payments by
Participants and the Indirect Participants to the beneficial owners of Senior
Notes will be governed by standing instructions and customary practices and will
not be the responsibility of DTC, the Trustee or the Company. Neither the
Company nor the Trustee will be liable for any delay by DTC or its Participants
in identifying the beneficial owners of the Senior Notes, and the Company and
the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Senior Notes
for all purposes.
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Interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Senior Notes only at the direction of one or more
Participants to whose account DTC interests in the Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the Senior
Notes as to which such Participant or Participants has or have given direction.
However, if there is an Event of Default under the Senior Notes, DTC reserves
the right to exchange Global Notes for legended Senior Notes in certificated
form, and to distribute such Senior Notes to its Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedure to facilitate transfers
of interests in the Global Notes among participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Initial
Purchaser or the Trustee will have any responsibility for the performance by
DTC, or its respective participants or indirect participants of it's respective
obligations under the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY SENIOR NOTES FOR CERTIFICATED SENIOR NOTES. A Global
Note is exchangeable for definitive Senior Notes in registered certificated form
(a "Certificated Senior Note") if (i) DTC (x) notifies the Company that it is
unwilling or unable to continue as depositary for the Global Notes and the
Company thereupon fails to appoint a successor depositary or (y) has ceased to
be a clearing agency registered under the Exchange Act, (ii) the Company at its
option, notifies the Trustee in writing that it elects to cause the issuance of
the Senior Notes in certificated form or (iii) there shall have occurred and be
continuing to occur a Default or an Event of Default with respect to the Senior
Notes. In addition, beneficial interests in a Global Note may be exchanged for
certificated Senior Notes upon request by only upon at least 20 days prior
written notice given to the Trustee by or on behalf of DTC in accordance with
customary procedures. In all cases, certificated Senior Notes delivered in
exchange for any Global Note or beneficial interest therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the depositary (in accordance with its customary procedures).
CERTIFICATED SECURITIES. Subject to certain conditions, any person having a
beneficial interest in the Global Note may, upon request to the Trustee, change
such beneficial interest for Senior Notes in the form of Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). In addition, if (i) the
Company notifies the Trustee in writing that the Depositary is no longer willing
or able to act as a depositary and the Company is unable to locate a qualified
successor within 90 days or (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Senior Notes in the
form of Certificated Securities under the Indenture, then, upon surrender by the
Global Note Holder of its Global Note, Notes in such form will be issued to each
person that the Global Note Holder and the Depositary identify as being the
beneficial owner of the related Senior Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Senior Notes and the Company and the Trustee may conclusively rely on, and will
be protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
NEXT DAY SETTLEMENT AND PAYMENT. The Indenture requires that payments in
respect of the Senior Notes represented by the Global Note (including principal,
premium, if any, interest and Liquidated Damages and Additional Amounts, if any)
be made by wire transfer of immediately available next day
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funds to the accounts specified by the Global Note Holder. With respect to
Certificated Securities, the Company will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available next day funds to the accounts specified by the Holders
thereof or, if no such account is specified, by mailing a check to each such
Holder's registered address. The Company expects that secondary trading in the
Certificated Securities will also be settled in immediately available funds.
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EXCHANGE OFFER; REGISTRATION RIGHTS
The Company and the Initial Purchaser, for the benefit of the holders of
Senior Notes, entered into the Registration Rights Agreement. Pursuant to the
Registration Rights Agreement, the Company agreed to file the Exchange Offer
Registration Statement with the SEC on the appropriate form under the Securities
Act with respect to the Exchange Offer to exchange the Senior Notes for an equal
principal amount of the Registered Senior Notes. If (i) the Company is not
required to file the Exchange Offer Registration Statement because the Exchange
Offer is not permitted by applicable law or SEC policy or (ii) any holder of
Transfer Restricted Senior Notes notifies the Company, within 20 business days
following the consummation of the Exchange Offer, that (A) such holder was
prohibited by law or SEC policy from participating in the Exchange Offer, or (B)
such holder may not resell the Registered Senior Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such holder, the Company will file with the SEC a
shelf registration statement (the "Shelf Registration Statement") to cover
resales of the Transfer Restricted Senior Notes by the holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. The Company will use
reasonable best efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the SEC. For purposes of the
foregoing, "Transfer Restricted Senior Notes" means each Senior Note until the
earliest to occur of (i) the date on which such Senior Note is exchanged in the
Exchange Offer for a Registered Senior Note which may be resold to the public by
the holder thereof without complying with the prospectus delivery requirements
of the Securities Act, (ii) the date on which such Senior Note has been sold or
otherwise disposed of in accordance with the Shelf Registration Statement, (iii)
the date on which such Senior Note is disposed of by a broker-dealer as
contemplated by the Exchange Offer Registration Statement (including delivery of
the prospectus contained therein) and (iv) the date on which such Senior Note is
distributed to the public pursuant to Rule 144 under the Securities Act.
A holder of Transfer Restricted Senior Notes who sells Senior Notes pursuant
to the Shelf Registration Statement will generally be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such a
holder (including certain indemnification obligations).
The Registration Rights Agreement provides that the Company use reasonable
best efforts to issue Exchange Notes in exchange for all Initial Notes tendered
prior thereto in the Exchange Offer. If the Company is obligated to file the
Shelf Registration Statement, the Company will file the Shelf Registration
Statement with the SEC on or prior to 30 days after such filing obligation
arises and use reasonable best efforts to cause the Shelf Registration Statement
to be declared effective by the SEC on or prior to 120 days after such
obligation arises; PROVIDED that if the Company has not consummated the Exchange
Offer by December 18, 1997, then the Company will file the Shelf Registration
Statement with the SEC on or prior to January 18, 1998. The Company will keep
the Exchange Offer open for not less than 20 business days (or longer if
required by applicable law) after the date notice of such Exchange Offer is
mailed to the holders of the Transfer Restricted Senior Notes. The Company shall
use reasonable best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended until the second anniversary of
the Closing Date or such shorter period that will terminate when all the Senior
Notes covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or are eligible for sale under Rule 144(k) under
the Securities Act; PROVIDED, HOWEVER that, if the Company is engaged in a
material acquisition or disposition and in certain other circumstances, the
Company may suspend offers and sales under the Shelf Registration Statement,
subject to certain conditions, for up to 30 days in each year during which the
Shelf Registration Statement is required to be effective. If (a) the Company
fails to file any of the registration statements required by the Registration
Rights Agreement on or before the date specified for such filing, (b) any of
such registration statements are not declared effective by the SEC on or prior
to the date specified for such effectiveness, (c) the Company fails to
consummate the Exchange Offer within 30 business days after the Exchange Offer
Registration Statement is first declared effective by the SEC, (d) the Shelf
Registration Statement or the Exchange Offer Registration Statement is declared
effective but thereafter, subject to certain exceptions, ceases to be
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effective for a period of one business day or (e) at any time when the
prospectus is required by the Securities Act to be delivered in connection with
sales of the Transfer Restricted Senior Notes, the Company shall conclude, or
the holders of a majority in principal amount of the affected Transfer
Restricted Notes shall reasonably conclude, based on the advice of their
counsel, and shall give notice to the Company, that either (A) any event shall
have occurred or fact exist as a result of which it is necessary to amend or
supplement the prospectus in order that it will not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made, in light of the circumstances under which they were made,
not misleading, or (B) it shall be necessary to amend or supplement such
registration statement or the prospectus in order to comply with the
requirements of the Securities Act or the rules of the SEC thereunder, and in
the case of clause (A) or (B), such registration statement is not appropriately
amended by an effective post-effective amendment, or the prospectus is not
amended or supplemented, in a manner reasonably satisfactory to the holders of
Transfer Restricted Senior Notes so as to be declared effective and made usable
within one business day after the Company shall so conclude or shall receive the
above-mentioned notice from holders of Transfer Restricted Senior Notes (each
such event referred to in clauses (a) through (e) above, a "Registration
Default"), then the Company will pay as liquidated damages ("Liquidated
Damages") to each holder of Transfer Restricted Senior Notes, with respect to
the first 90-day period immediately following the occurrence of such
Registration Default, an amount equal to $0.05 per week for each $1,000
principal amount of Senior Notes held by such holder. The amount of the
Liquidated Damages will increase by an additional $0.05 per week for each $1,000
principal amount of Senior Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $0.50 per week for each $1,000 principal amount of Senior
Notes. Liquidated Damages will not accrue during any period the Company is
permitted, as set forth above, to suspend offerings and sales when the Company
is engaged in a material acquisition or disposition or in certain other
circumstances. All accrued Liquidated Damages will be paid by the Company to the
holder of the Global Note by wire transfer of immediately available funds or by
federal funds check and to holders of Certificated Senior Notes by mailing
checks to their registered addresses. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
Holders of Transfer Restricted Senior Notes will be required to make certain
representations to the Company (as described herein under the caption "The
Exchange Offer--Procedures for Tendering Initial Notes") in order to participate
in the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Transfer Restricted Senior
Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages set forth above. Holders of Transfer
Restricted Senior Notes will be responsible for the fees and disbursements, if
any, of their counsel, accountants and any other advisors, and for underwriting
commissions and discounts, brokerage commissions, agent fees (other than the
fees of the exchange agent for the Exchange Offer) and transfer taxes relating
to the Exchange Offer Registration Statement or the Shelf Registration
Statement.
The foregoing description of the Registration Rights Agreement is a summary
only and does not purport to be complete. This summary is qualified in its
entirety by reference to all provisions of the Registration Rights Agreement
herein under the caption "The Exchange Offer--Procedures for Tendering Initial
Note" which has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain of the anticipated federal income tax
consequences of an exchange of Initial Notes for Exchange Notes and of the
purchase, ownership, and disposition of the Exchange Notes is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
final temporary, and proposed regulations promulgated thereunder, and
administrative rulings and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations. This summary does not purport to deal with all aspects of
federal income taxation that may be relevant to a particular investor, nor any
tax consequences arising under the laws of any state, locality, or foreign
jurisdiction, and it is not intended to be applicable to all categories of
investors, some of which, such as dealers in securities, banks, insurance
companies, tax-exempt organizations, foreign persons, persons that hold Exchange
Notes as part of a straddle or conversion transaction, or holders subject to the
alternative minimum tax, may be subject to special rules. In addition, the
summary is limited to persons that will hold the Exchange Notes as "capital
assets" (generally, property held for investment) within the meaning of Section
1221 of the Code. ALL INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS
REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE
EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF EXCHANGE NOTES.
TAXATION OF HOLDERS ON EXCHANGE
Although the matter is not free from doubt, an exchange of Initial Notes for
Exchange Notes should not be a taxable event to holders of Initial Notes and
holders should not recognize any taxable gain or loss as a result of such an
exchange. Accordingly, a holder would have the same adjusted basis and holding
period in the Exchange Notes as it had in the Initial Notes immediately before
the exchange. Further, the tax consequences of ownership and disposition of any
Exchange Notes should be the same as the tax consequences of ownership and
disposition of Initial Notes.
MARKET DISCOUNT
If a holder purchases a Senior Note for an amount that is less than its
principal amount, the amount of the difference will be treated as "market
discount" for federal income tax purposes, unless such difference is less than a
specified de minimis amount. Under the market discount rules, a holder will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a Senior Note as ordinary income to the
extent of the market discount which has not previously been included in income
and is treated as having accrued on such a Senior Note at the time of such
payment or disposition. In addition, the holder may be required to defer, until
the maturity of the Senior Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Senior Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Senior Note, unless the
holder elects to accrue on a constant interest method. A holder of a Senior Note
may elect to include market discount in income currently as it accrues (on
either a ratable or constant interest method), in which case the rule described
above regarding deferral of interest deductions will not apply. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service (the "IRS").
AMORTIZABLE BOND PREMIUM
A holder that purchases a Senior Note for an amount in excess of the sum of
its principal amount will be considered to have purchased the Senior Note at a
"premium." A holder generally may elect to amortize the premium over the
remaining term of the Senior Note on a constant yield method. The
91
<PAGE>
amount amortized in any year will be treated as a reduction of the holder's
interest income from the Senior Note. Bond premium on a Senior Note held by a
holder that does not make such an election will decrease the gain or increase
the loss otherwise recognized on disposition of the Senior Note. The election to
amortize premium on a constant yield method once made applies to all debt
obligations held or subsequently acquired by the electing holder on or after the
first day of the first taxable year to which the election applies and may not be
revoked with the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF SENIOR NOTES
A holder's tax basis in a Senior Note will, in general, be the holder's cost
therefor, increased by market discount previously included in income by the
holder and reduced by any amortized premium. Upon the sale, exchange or
retirement of a Senior Note, a holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange or retirement
(less any accrued interest, which will be taxable as such) and the adjusted tax
basis of the Senior Note. Except as described above with respect to market
discount, such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of sale, exchange or retirement the Senior
Note has been held for more than one year. Under current law, long-term capital
gains of individuals are, under certain circumstances, taxed at lower rates than
items of ordinary income. The deductibility of capital losses is subject to
limitations.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Senior Notes and to the
proceeds of sale of a Senior Note made to holders other than certain exempt
recipients (such as corporations). A 31% backup withholding tax will apply to
such payments if the holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
THE FOREGOING SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES TO
HOLDERS DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO A PARTICULAR HOLDER OF SENIOR NOTES IN LIGHT OF HIS PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF SENIOR NOTES SHOULD
CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH
HOLDER OF THE OWNERSHIP AND DISPOSITION OF THE SENIOR NOTES, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OR
SUBSEQUENT VERSIONS THEREOF.
ERISA CONSIDERATIONS
Sections 406 and 407 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and Section 4975 of the Code prohibit certain employee
benefit plans, individual retirement accounts, individual retirement annuities,
and employee annuity plans ("Plans") from engaging in certain transactions with
persons who, with respect to such Plan, are "parties in interest" under ERISA or
"disqualified persons" under the Code. A violation of these "prohibited
transactions" rules may generate excise taxes under the Code and other
liabilities under ERISA for such persons. Possible violations of the prohibited
transaction rules occur if the Senior Notes are purchased with the assets of any
Plan if the Company or any of its affiliates is a party in interest or
disqualified person with respect to such Plan, unless such acquisition is
subject to a statutory or administrative exemption.
The foregoing discussion is general in nature and is not intended to be
all-inclusive. Any fiduciary of a Plan considering the purchase of the Senior
Notes should consult its legal advisors regarding the
92
<PAGE>
consequences of such purchases under ERISA and the Code. If the Plan is not
subject to ERISA, the fiduciary should consult its legal advisors regarding the
consequences of any state law or Code considerations.
PLAN OF DISTRIBUTION
There has previously been only a limited secondary market and no public
market for the Initial Notes. The Company does not intend to apply for the
listing of the Senior Notes on a national securities exchange or for their
quotation through The Nasdaq Stock Market. The Initial Notes are eligible for
trading in the PORTAL market. The Company has been advised by the Initial
Purchaser that the Initial Purchaser currently intend to make a market in the
Senior Notes; however, the Initial Purchaser is not obligated to do so and any
market making may be discontinued by the Initial Purchaser at any time. In
addition, such market making activity may be limited during the Exchange Offer.
Therefore, there can be no assurance that an active market for the Initial Notes
or the Exchange Notes will develop.
If a trading market develops for the Initial Notes or the Exchange Notes,
future trading prices of such securities will depend on many factors, including,
among other things, prevailing interest rates, the Company's results of
operations and the market for similar securities. Depending on such factors,
such securities may trade at a discount from their offering price.
With respect to resale of Exchange Notes, based on an interpretation by the
staff of the SEC set forth in no-action letters issued to third parties, the
Company believes that a holder (other than a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act or "broker" or
"dealer" registered under the Exchange Act) who exchanges Initial Notes for
Exchange Notes in the ordinary course of business and who is not participating,
does not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of the Exchange Notes, will be
allowed to resell the Exchange Notes to the public without further registration
under the Securities Act and without delivering to the purchasers of the
Exchange Notes a prospectus that satisfies the requirements of Section 10
thereof. However, if any holder acquires Exchange Notes in the Exchange Offer
for the purpose of distributing or participating in a distribution of the
Exchange Notes, such holder cannot rely on the position of the staff of the SEC
enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) or
similar no-action or interpretive letters and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction, and such secondary resale transaction must be
covered by an effective registration statement containing the selling security
holder information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of Exchange Notes obtained by such holder in exchange for
Initial Notes acquired by such holder directly from the Company or an affiliate
thereof, unless an exemption from registration is otherwise available.
As contemplated by the above no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder in the ordinary course of business, (ii) the holder is
not engaging and does not intend to engage in the distribution of the Exchange
Notes, and (iii) the holder acknowledges that if such holder participates in the
Exchange Offer for the purpose of distributing the Exchange Notes such holder
must comply with the registration and prospectus delivery requirements of the
Securities Act and cannot rely on the above no-action letters.
Any broker or dealer registered under the Exchange Act (each a
"Broker-Dealer") who holders Initial Notes that were acquired for its own
account as a result of market-making activities or other trading activities
(other than Initial Notes acquired directly from the Company) may exchange such
Initial Notes for Exchange Notes pursuant to the Exchange Offer; however, such
Broker Dealer may be deemed an underwriter within the meaning of the Securities
Act and, therefore, must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of the Exchange Notes received by
it in
93
<PAGE>
the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such Broker-Dealer of this Prospectus. The Company has agreed to
cause the Registration Statement, of which this Prospectus is a part, to remain
continuously effective for a period of one year from the Exchange Date, and to
make this Prospectus, as amended or supplemented, available to any such
Broker-Dealer for use in connection with resales. Any Broker-Dealer
Participating in the Exchange Offer will be required to acknowledge that it will
deliver a prospectus in connection with any resales of Exchange Notes received
by it in the Exchange Offer. The delivery by a Broker-Dealer of a prospectus in
connection with resales of Exchange Notes shall not be deemed to be an admission
by such Broker-Dealer that it is an underwriter within the meaning of the
Securities Act.
The Company will not receive any proceeds from any sale of Exchange Notes by
Broker Dealers. Exchange Notes received by Broker Dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to a purchaser or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Broker-Dealer and/or the purchasers of any such Exchange Notes.
The Company has agreed to pay all expenses incident to the Exchange Offer
other than fees and disbursements of counsel, accountants and any advisors to
holders of Initial Notes, underwriting commissions and discounts, brokerage
commissions, agent fees (other than the fees of the Exchange Agent) and transfer
taxes relating to the Registration Statement.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes offered hereby
will be passed upon for the Company and the Guarantors, by Paul, Weiss, Rifkind,
Wharton & Garrison, New York, New York.
EXPERTS
The consolidated financial statements and schedule of Playtex Products, Inc.
and its subsidiaries as of December 28, 1996 and December 30, 1995, and for each
of the years ended on December 28, 1996, December 30, 1995, and December 31,
1994, have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
94
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
I. PLAYTEX PRODUCTS, INC. ANNUAL FINANCIAL STATEMENTS:
Report of KPMG Peat Marwick LLP........................................................................ F-2
Consolidated Balance Sheets as of December 28, 1996 and December 30, 1995.............................. F-3
Consolidated Statements of Operations for the twelve months ended December 28, 1996, December 30, 1995
and December 31, 1994................................................................................. F-4
Consolidated Statements of Redeemable Preferred Stocks, Common Stock and Other Stockholders' Equity for
the twelve months ended December 28, 1996, December 30, 1995 and December 31, 1994.................... F-5
Consolidated Statements of Cash Flows for the twelve months ended December 28, 1996, December 30, 1995
and December 31, 1994................................................................................. F-6
Notes to Consolidated Financial Statements............................................................. F-7
Report of KPMG Peat Marwick LLP on Schedule re. Valuation and Qualifying Accounts...................... S-1
</TABLE>
F-1
<PAGE>
PLAYTEX PRODUCTS, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Playtex Products, Inc.
We have audited the accompanying consolidated balance sheets of Playtex
Products, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995,
and the related consolidated statements of operations, redeemable preferred
stocks, common stock and other stockholders' equity and cash flows for the
twelve months ended December 28, 1996, December 30, 1995 and December 31, 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Playtex
Products, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995
and the results of their operations and their cash flows for the twelve months
ended December 28, 1996, December 30, 1995 and December 31, 1994, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
February 7, 1997
Stamford, Connecticut
F-2
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................................... $ 6,205 $ 5,940
Receivables, less allowance for doubtful accounts.................................. 63,982 58,019
Inventories........................................................................ 37,637 49,190
Deferred income taxes.............................................................. 9,702 13,154
Other current assets............................................................... 4,965 4,545
------------ ------------
Total current assets............................................................. 122,491 130,848
Net property, plant and equipment.................................................... 53,408 52,462
Intangible assets, net:
Goodwill........................................................................... 348,449 359,629
Patents, trademarks and other...................................................... 36,405 38,076
Deferred financing costs........................................................... 15,337 17,426
Due from related party............................................................... 80,017 80,017
Other noncurrent assets.............................................................. 4,224 4,403
------------ ------------
Total assets..................................................................... $ 660,331 $ 682,861
------------ ------------
------------ ------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable................................................................... $ 36,131 $ 20,057
Accrued expenses................................................................... 49,252 60,257
Income taxes payable............................................................... 5,586 1,897
Current maturities of long-term debt............................................... 25,000 20,000
------------ ------------
Total current liabilities........................................................ 115,969 102,211
Long-term debt....................................................................... 714,700 770,050
Due to related party................................................................. 78,386 78,386
Other noncurrent liabilities......................................................... 14,207 16,784
Deferred income taxes................................................................ 19,796 16,406
------------ ------------
Total liabilities................................................................ 943,058 983,837
------------ ------------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000 shares, issued 50,887,200
shares at December 28, 1996 and 50,879,701 shares at December 30, 1995........... 509 509
Additional paid-in capital........................................................... 424,277 424,217
Retained earnings (deficit).......................................................... (705,718) (723,917)
Foreign currency translation adjustment.............................................. (1,795) (1,785)
------------ ------------
Total stockholders' equity....................................................... (282,727) (300,976)
------------ ------------
Total liabilities and stockholders' equity....................................... $ 660,331 $ 682,861
------------ ------------
------------ ------------
</TABLE>
See the accompanying notes to consolidated financial statements.
F-3
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
<S> <C> <C> <C>
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
Net sales............................................................. $ 498,742 $ 483,581 $ 473,275
Cost of sales......................................................... 192,512 188,129 166,601
------------ ------------ ------------
Gross profit........................................................ 306,230 295,452 306,674
------------ ------------ ------------
Operating expenses:
Advertising and sales promotion..................................... 119,380 117,581 98,999
Selling, distribution and research.................................. 56,776 54,251 51,628
Administrative...................................................... 18,028 23,625 16,172
Amortization of intangibles......................................... 12,846 11,268 10,181
Write-off of SMILETOTE intangible assets............................ -- 6,441 --
------------ ------------ ------------
Total operating expenses.......................................... 207,030 213,166 176,980
------------ ------------ ------------
Operating earnings................................................ 99,200 82,286 129,694
Interest expense including related party interest expense of $12,150,
net of related party interest income of $12,003 for all periods
presented........................................................... 64,860 71,361 76,153
------------ ------------ ------------
Earnings before income taxes........................................ 34,340 10,925 53,541
Income taxes.......................................................... 16,141 8,151 23,994
------------ ------------ ------------
Earnings before extraordinary loss.................................. 18,199 2,774 29,547
Extraordinary loss on early extinguishment of debt, net of $5,180 tax
benefit............................................................. -- (7,935) --
------------ ------------ ------------
Net earnings (loss)................................................. 18,199 (5,161) 29,547
Preferred dividend requirements....................................... -- -- (1,163)
------------ ------------ ------------
Net earnings (loss) available to common stockholders................ $ 18,199 $ (5,161) $ 28,384
------------ ------------ ------------
------------ ------------ ------------
Earnings (loss) per share after preferred dividend requirements
(primary and fully diluted):
Before extraordinary loss........................................... $ .36 $ .07 $ .97
Net earnings (loss)................................................. $ .36 $ (.12) $ .97
Average shares outstanding............................................ 50,883 42,309 29,212
</TABLE>
See the accompanying notes to consolidated financial statements.
F-4
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCKS,
COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
REDEEMABLE ADDITIONAL RETAINED CURRENCY
PREFERRED COMMON PAID-IN EARNING TRANSLATION
STOCKS STOCK CAPITAL (DEFICIT) ADJUSTMENT
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 25, 1993.......................... $ 139,644 $ 109 $ 25,301 $ (747,140) $ (1,678)
Net earnings...................................... -- -- -- 29,547 --
Accrued dividend requirements..................... 1,163 -- -- (1,163) --
Issuance of shares of common stock, net........... -- 200 244,116 -- --
Redemption of redeemable preferred
stocks.......................................... (140,807) -- -- -- --
Consent fee paid to Sara Lee...................... -- -- (15,000) -- --
Foreign currency translation adjustment........... -- -- -- -- (289)
----------- ----- ---------- ----------- -----------
Balance, December 31, 1994.......................... -- 309 254,417 (718,756) (1,967)
Net loss.......................................... -- -- -- (5,161) --
Issuance of shares of common stock, net........... -- 200 169,800 -- --
Foreign currency translation adjustment........... -- -- -- -- 182
----------- ----- ---------- ----------- -----------
Balance, December 30, 1995.......................... -- 509 424,217 (723,917) (1,785)
Net earnings...................................... -- -- -- 18,199 --
Issuance of shares of common stock................ -- -- 60 -- --
Foreign currency translation adjustment........... -- -- -- -- (10)
----------- ----- ---------- ----------- -----------
Balance, December 28, 1996.......................... $ -- $ 509 $ 424,277 $ (705,718) $ (1,795)
----------- ----- ---------- ----------- -----------
----------- ----- ---------- ----------- -----------
</TABLE>
See the accompanying notes to consolidated financial statements.
F-5
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
------------------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ -------------------- ------------
<S> <C> <C> <C>
Cash flows from operations:
Net earnings (loss).......................................... $ 18,199 $ (5,161) $ 29,547
Non-cash items included in earnings:
Extraordinary loss......................................... -- 7,935 --
Write-off of SMILETOTE intangible assets................... -- 6,441 --
Amortization of intangibles................................ 12,846 11,268 10,181
Amortization of deferred financing costs................... 2,089 2,246 2,358
Depreciation............................................... 8,929 8,496 7,412
Deferred income taxes...................................... 6,842 (133) 19,849
Other, net................................................. 48 (291) --
Increase (decrease) in working capital items, net of effects
of acquisitions:
Increase in receivables.................................... (5,963) (4,471) (10,871)
Decrease (increase) in inventories......................... 11,553 4,629 (8,549)
Increase in other current assets........................... (420) (1,802) (560)
Increase (decrease) in accounts payable.................... 16,074 6,967 (10,959)
(Decrease) increase in accrued expenses.................... (12,794) (7,076) 729
Increase (decrease) in income taxes payable................ 3,689 (4,207) (397)
(Decrease) increase in accrued interest.................... (788) 2,238 (3,987)
------------ -------- ------------
Net cash flow from operations............................ 60,304 27,079 34,753
Cash flows used for investing activities:
Purchases of property, plant and equipment................... (9,740) (12,395) (8,503)
Businesses or investments acquired........................... -- (94,429) (7,044)
------------ -------- ------------
Net cash used for investing activities................... (9,740) (106,824) (15,547)
Cash flows (used for) from financing activities:
Net (payments) borrowings under working capital credit
facilities................................................. (2,850) (42,650) 47,700
Long-term debt borrowings.................................... -- 425,000 860,000
Long-term debt payments...................................... (47,500) (468,000) (947,413)
Payment of recapitalization costs............................ -- -- (44,155)
Redemption of preferred stock................................ -- -- (140,807)
Payment of financing costs................................... -- (9,113) (25,750)
Issuance of shares of common stock........................... 60 170,000 244,316
Consent fee paid to Sara Lee Corporation..................... -- -- (15,000)
Other, net................................................... (9) 75 (3,111)
------------ -------- ------------
Net cash (used for) from financing activities............ (50,299) 75,312 (24,220)
Increase (decrease) in cash.................................... 265 (4,433) (5,014)
Cash at beginning of period.................................... 5,940 10,373 15,387
------------ -------- ------------
Cash at end of period.......................................... $ 6,205 $ 5,940 $ 10,373
------------ -------- ------------
------------ -------- ------------
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest..................................................... $ 63,559 $ 66,884 $ 89,755
Income taxes, net of refunds................................. $ 5,610 $ 10,748 $ 3,989
</TABLE>
See the accompanying notes to consolidated financial statements.
F-6
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Playtex Products, Inc. and all of its subsidiaries ("Playtex" or
the "Company"). All significant intercompany balances have been eliminated.
INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out basis) or market. Inventory costs include material, labor and
manufacturing overhead.
LONG-LIVED ASSETS--Effective January 1, 1996, Playtex adopted the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
Impairment of Long Lived Assets and for Long Lived Assets to Be Disposed of
("SFAS 121")". Such adoption had no impact on the accompanying consolidated
financial statements. In accordance with SFAS 121, the Company systematically
reviews the recoverability of the long-lived assets by comparing their
unamortized carrying value to their related anticipated undiscounted future cash
flows. Any impairment related to long-lived assets is measured by reference to
the assets' fair market value. Impairments are charged to expense when such
determination is made.
NET PROPERTY, PLANT AND EQUIPMENT--Depreciation is provided on the
straight-line method over the estimated useful lives of the respective assets
(ranging from 3 to 40 years). Repair and maintenance costs ($5.5 million in
1996, $5.1 million in 1995 and $4.7 million in 1994) are expensed; renewals and
betterments are capitalized.
INTANGIBLE ASSETS--Intangible assets are amortized on a straight-line basis
over a period not exceeding 40 years. The Company systematically reviews the
recoverability of its goodwill by comparing their unamortized value to their
relative anticipated undiscounted future cash flows. Any impairment related to
goodwill is measured against discounted cash flows.
DEFERRED FINANCING COSTS--Fees and expenses relating to debt issuance costs
are classified as deferred financing costs and are amortized, under the interest
method, over the average life of the related debt (ranging from 8 to 10 years).
Fees and expenses related to bank financing are amortized on a straight line
basis over the term of the facility.
INCOME TAXES--Deferred tax assets and liabilities are provided using the
asset and liability method for temporary differences between financial and tax
reporting using the enacted tax rates in effect for the period in which the
differences are expected to reverse.
FOREIGN CURRENCY TRANSLATION--The functional currency of Playtex's Canadian
operations is the local currency. Net exchange gains or losses resulting from
the translation of assets and liabilities are accumulated in a separate section
of stockholders' equity titled "Foreign currency translation adjustment."
EARNINGS PER SHARE--Earnings (loss) per share are net earnings (loss) less
the dividend requirements on preferred stocks, divided by the weighted average
number of common shares issued and outstanding for the periods. In connection
with the 1994 Recapitalization (as defined below), Playtex effected a one for
4.6296 reverse stock split. All per share information has been adjusted to
reflect the reverse stock split on a retroactive basis. The 1995 earnings per
share before extraordinary loss, assuming the 1995 Transaction (as defined
below) took place on January 1, 1995, would have been $0.13 per share. Earnings
per share in 1994, assuming the 1994 Recapitalization took place on December 26,
1993, would have been $1.01 per share.
F-7
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES--The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements,
and the reported amounts of revenue and expenses during the reporting period.
Actual results could vary from those estimates.
2. THE 1995 TRANSACTION
On June 6, 1995, following the receipt of stockholder approval at the Annual
Meeting of Stockholders, the Company consummated the sale of 20 million shares
of common stock of the Company, par value $.01 per share, at a price of $9.00
per share to HWH Capital Partners, L.P., HWH Valentine Partners, L.P., and HWH
Surplus Valentine Partners, L.P. (collectively, the "Investors"), each a
Delaware limited partnership managed by Haas Wheat & Partners Incorporated,
pursuant to a Stock Purchase Agreement, dated as of March 17, 1995, between the
Company and the Investors. The Investors' shares constitute approximately 40% of
the Company's outstanding common stock. At the Annual Meeting, designees of the
Investors were elected by the Company's stockholders as a majority of the
Company's Board of Directors. Costs and expenses associated with the sale (the
"Investment"), including advisory fees, investment banking, legal and certain
other expenses, amounted to approximately $10.0 million. The net proceeds of the
Investment were used by the Company, together with borrowings under the 1995
Credit Agreement (as defined below), to refinance all borrowings under the 1994
Credit Agreement (as defined in note 3).
Contemporaneously with the Investment, the Company entered into a new bank
credit agreement (the "1995 Credit Agreement" and, together with the Investment,
the "1995 Transaction") which provides for a new credit facility in the
aggregate amount of $500.0 million consisting of (i) $387.5 million in term
loans (the "1995 Term Loan Facility"), (ii) a $75.0 million revolving credit
facility (the "1995 Working Capital Facility") and (iii) a $37.5 million
acquisition revolving credit facility (the "1995 Acquisition Credit Facility").
Fees and expenses associated with the new credit agreement of $9.1 million are
being amortized over the term of the associated credit agreement.
3. THE 1994 RECAPITALIZATION
During the first quarter of fiscal 1994, Playtex completed a
recapitalization plan (the "1994 Recapitalization") designed to reduce
indebtedness, interest expense and preferred stock dividend requirements and to
improve Playtex's cash flow and operating and financial flexibility. The 1994
Recapitalization included transactions effected by Playtex and its former
subsidiary Playtex Family Products Corporation, which was subsequently merged
into Playtex. Therefore, all references to Playtex include the activities of the
merged companies.
The principal elements of the 1994 Recapitalization included: (a) the
issuance of 20.0 million shares of Common Stock at a price of $13.00 per share,
(b) borrowings from banks of $500.0 million under a term loan facility (the
"1994 Term Loan Facility") and of approximately $40.0 million under a $75.0
million working capital facility (the "1994 Revolving Credit Facility" and,
together with the 1994 Term Loan Facility, the "1994 Credit Agreement") and (c)
the issuance of $360.0 million aggregate principal amount of 9% Senior
Subordinated Notes due 2003 (the "9% Notes").
The net proceeds from the 1994 Recapitalization were used to retire the
indebtedness under the Company's previous term loan and revolving credit
facilities, and its senior and subordinated debt and
F-8
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. THE 1994 RECAPITALIZATION (CONTINUED)
preferred stocks (including premiums, accrued interest and accrued preferred
dividends). In addition, the Company paid a $15.0 million consent fee to Sara
Lee Corporation in consideration for the early termination of Sara Lee's option
to acquire the remaining common stock of the Company. The 1994 Recapitalization
and related public debt and preferred stock redemptions were completed on March
4, 1994.
4. BUSINESSES AND INVESTMENTS ACQUIRED
BANANA BOAT HOLDING CORPORATION ("BBH")--On October 31, 1995, the Company
and BBH Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of
Playtex, acquired all issued and outstanding common shares not previously owned
by Playtex, of BBH, a Delaware corporation and manufacturer of BANANA BOAT sun
and skin care products (the "BBH Acquisition"). The BBH Acquisition was
completed pursuant to an agreement and plan of merger dated October 17, 1995.
Prior to the BBH Acquisition, Playtex had recognized 42.5% of the operating
profits from the sale of BANANA BOAT products, in accordance with the terms of a
distribution agreement between BBH and Playtex. Following the BBH Acquisition,
Playtex's equity ownership of BBH increased from 22% to 100% and the Company's
interest in the operating profits from the sale of BANANA BOAT products
increased to 100%. Concurrent with the BBH acquisition, the distribution
agreement was terminated.
The net funds expended for the BBH Acquisition included cash of $40.4
million, the retirement of $27.1 million of BBH's long-term debt, the assumption
of BBH's working capital facility and the payment of accrued interest and
transaction fees of $4.3 million. The BBH Acquisition was financed with $34.3
million of existing cash balances and advances under the 1995 Acquisition Credit
Facility of $37.5 million. The BBH Acquisition was accounted for as a purchase
and the results of operations of BBH have been included in the consolidated
statements of operations from the date of acquisition. Accordingly, the purchase
price was allocated to the assets acquired and the liabilities assumed based on
the fair values at the date of acquisition. The excess purchase price over the
fair value of net assets acquired was $44.1 million and is being amortized on a
straight-line basis over 40 years.
WOOLITE -REGISTERED TRADEMARK- RUG AND UPHOLSTERY CLEANING PRODUCTS
("WOOLITE")--Playtex entered into an Asset Purchase and Sale Agreement, dated
December 22, 1994, with Reckitt & Colman, Inc. (R&C), a Delaware corporation,
pursuant to which Playtex acquired certain assets of the WOOLITE business from
R&C (the "Acquired Assets") under an exclusive, royalty-free trademark license
in perpetuity in the United States and Canada. The purchase price for the
Acquired Assets, exclusive of $0.1 million for legal and other costs, was $21.7
million, which was paid in cash with borrowings under the 1994 Revolving Credit
Facility.
The WOOLITE acquisition was accounted for as a purchase and the results of
operations of WOOLITE have been included in the consolidated statements of
operations from the date of acquisition. Accordingly, the purchase price was
allocated to the assets acquired and the liabilities assumed based on the fair
values at the date of acquisition. The excess purchase price over the fair value
of net assets acquired was $17.3 million and is being amortized on a
straight-line basis over 30 years.
F-9
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
Receivables.......................................................................... $ 65,740 $ 60,061
Less allowance for doubtful accounts................................................. (1,758) (2,042)
------------ ------------
Net.............................................................................. $ 63,982 $ 58,019
------------ ------------
------------ ------------
Inventories:
Raw materials...................................................................... $ 13,854 $ 18,187
Work in process.................................................................... 1,004 1,267
Finished goods..................................................................... 22,779 29,736
------------ ------------
Total.......................................................................... $ 37,637 $ 49,190
------------ ------------
------------ ------------
Net property, plant and equipment:
Land............................................................................... $ 1,190 $ 1,190
Buildings.......................................................................... 24,818 24,055
Machinery and Equipment............................................................ 95,938 86,955
------------ ------------
121,946 112,200
Less accumulated depreciation........................................................ (68,538) (59,738)
------------ ------------
Net.............................................................................. $ 53,408 $ 52,462
------------ ------------
------------ ------------
Goodwill............................................................................. $ 446,602 $ 446,482
Less accumulated amortization........................................................ (98,153) (86,853)
------------ ------------
Net.............................................................................. $ 348,449 $ 359,629
------------ ------------
------------ ------------
Patents, trademarks and other........................................................ $ 49,644 $ 49,769
Less accumulated amortization........................................................ (13,239) (11,693)
------------ ------------
Net.............................................................................. $ 36,405 $ 38,076
------------ ------------
------------ ------------
Deferred financing costs............................................................. $ 19,463 $ 19,463
Less accumulated amortization........................................................ (4,126) (2,037)
------------ ------------
Net.............................................................................. $ 15,337 $ 17,426
------------ ------------
------------ ------------
Accrued expenses:
Advertising and sales promotion.................................................... $ 19,191 $ 29,401
Employee compensation and benefits................................................. 12,349 10,162
Interest........................................................................... 5,532 6,320
Insurance.......................................................................... 4,731 4,858
Other.............................................................................. 7,449 9,516
------------ ------------
Total........................................................................ $ 49,252 $ 60,257
------------ ------------
------------ ------------
</TABLE>
6. DUE FROM RELATED PARTY
Playtex Investment Corp., a wholly owned subsidiary of Playtex, is the
holder of 15% debentures in aggregate principal amount of $40 million (the
"Apparel Debenture") issued by Playtex Apparel Partners,
F-10
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. DUE FROM RELATED PARTY (CONTINUED)
L.P. (the "Apparel Partnership") in connection with its 1988 acquisition of
Playtex Apparel, Inc. Interest on the 15% debentures is payable annually in cash
on each December 15. However, with respect to any such interest amount payable
prior to maturity, Apparel Partnership may elect and elected for periods through
December 15, 1993 to make such payments in additional 15% debentures. On
December 16, 1996 and December 15, 1995, the Apparel Partnership paid in cash
the accrued interest for the annual periods then ended. Principal and any unpaid
accrued interest are due in cash on December 15, 2003. The obligations of the
Apparel Partnership are nonrecourse to the partners of the Apparel Partnership.
The assets of the Apparel Partnership are Sara Lee Corporation common stock with
a market value at December 28, 1996 and December 30, 1995 of approximately $7.7
and $7.9 million, respectively, cash of approximately $0.4 and $0.3 million,
respectively, and Playtex's 15 1/2% Subordinated Notes. See notes 8 and 15 for a
discussion of the relationship between the Apparel Partnership and Playtex.
Playtex believes that the Apparel Debenture represents the only material
liability of the Apparel Partnership.
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
1995 Credit Agreement:
Working Capital Facility....................................... $ 2,200 $ 5,050
Term Loan Facility............................................. 367,500 387,500
Acquisition Credit Facility.................................... 10,000 37,500
9% Senior Subordinated Notes due 2003............................ 360,000 360,000
------------ ------------
739,700 790,050
Less current maturities.......................................... (25,000) (20,000)
------------ ------------
Total long-term debt....................................... $ 714,700 $ 770,050
------------ ------------
------------ ------------
</TABLE>
On June 6, 1995, as part of the 1995 Transaction (as described in note 2),
Playtex entered into the 1995 Credit Agreement, which provided for borrowings of
$387.5 million under the 1995 Term Loan Facility, and up to $75.0 million and
$37.5 million under the 1995 Working Capital Facility and the 1995 Acquisition
Credit Facility, respectively. The 1995 Term Loan Facility provides for
semi-annual repayments of principal, including payments of $12.5 million due on
March 15, 1997 and September 15, 1997. Commitments under the 1995 Acquisition
Credit Facility are automatically and permanently reduced semi-annually at a
rate of $6.25 million beginning March 15, 2000. All borrowings under the 1995
Credit Agreement have a final maturity of June 30, 2002.
The rate of interest on borrowings under the 1995 Credit Agreement is, at
Playtex's option, a function of various alternative short term borrowing rates,
as defined in the 1995 Credit Agreement. Quarterly commitment fees of
three-eighths of 1% on the unutilized portion of the 1995 Credit Agreement and
an agency fee of $0.1 million per annum are also required. At December 28, 1996,
aggregate unused lines of credit (giving effect to outstanding letters of
credit) under the 1995 Credit Agreement amounted to $98.9 million.
The provisions of the 1995 Credit Agreement require Playtex to meet certain
financial covenants and ratios and also include conditions or restrictions on:
new indebtedness and liens; major acquisitions or
F-11
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
mergers; capital expenditures and disposition of assets; certain dividends and
other distributions; and prepayment and modification of indebtedness or equity
capitalization. The 9% Notes also contain restrictions and requirements with
regard to similar matters. Under the terms of the 1995 Credit Agreement and the
9% Notes, payment of cash dividends on the common stock of Playtex is
restricted. Certain wholly-owned subsidiaries of the Company are guarantors of
the 9% Notes (see note 20).
On June 9, 1995, the Company entered into an interest rate protection
agreement such that, for a two year period commencing July 6, 1995, interest
expense with respect to $125 million of its variable rate outstanding
indebtedness is at fixed rates. The agreement can be extended, at the option of
the counterparty, for an additional one year period. The agreement provides for
quarterly payments by Playtex at a rate of 6.17% up to October 6, 1995 and at a
rate of 5.96% until July 7, 1997 (or July 6, 1998 if the counterparty exercises
its option to extend the agreement) and receipt of payments from the
counterparty at a 90-day LIBOR rate. This agreement effectively fixes the rate
on $125 million at 7.71%, after giving effect to the 1.75% spread as provided
for in the 1995 Credit Agreement.
Effective July 25, 1995, the Company entered into a second interest rate
protection agreement to fix interest expense with respect to an additional $100
million of its outstanding indebtedness. This agreement provides for quarterly
payments by Playtex at a rate of 5.825% and receipt of quarterly payments from
the counterparty at a 90-day LIBOR rate until July 25, 1997 (or July 25, 1998,
if extended by the counterparty). This agreement effectively fixes the rate on
$100 million at 7.575%, after giving effect to the 1.75% spread as provided for
in the 1995 Credit Agreement.
Effective July 25, 1996, the Company entered into a third interest rate
protection agreement to fix interest expense with respect to an additional $150
million of its outstanding indebtedness. This agreement provides for quarterly
payments by Playtex at a rate of 5.59% and receipt of quarterly payments from
the counterparty at a 90-day LIBOR rate until July 25, 1998. The agreement will
terminate with no penalty to either party, if the 90-day LIBOR rate is equal to
or greater than 6.25% at any 90 day interest reset date. This agreement
effectively fixes the rate on $150 million at 7.34%, after giving effect to the
1.75% spread as provided for in the 1995 Credit Agreement.
Net receipts or payments under these agreements are recognized as an
adjustment to interest expense.
Aggregate annual maturities under the 1995 Credit Agreement are (in
millions): $25.0 in fiscal 1997, $30.0 in fiscal 1998, $50.0 in fiscal 1999,
$85.0 in fiscal 2000 and $105.0 in fiscal 2001.
At December 28, 1996, December 30, 1995 and December 31, 1994, the weighted
average interest rates for the 1995 Credit Agreement borrowings were 7.32%,
7.57% and 9.19%, respectively. In addition, the weighted average interest rates
on such borrowings were 7.35%, 8.11% and 7.30% for the twelve month periods
ended December 28, 1996, December 30, 1995 and December 31, 1994, respectively.
On February 2, 1994, Playtex issued $360.0 million aggregate principal
amount of 9% Notes. Interest on the 9% Notes is payable in cash semi-annually on
each June 15 and December 15. Principal of the Notes is due on December 15,
2003.
8. DUE TO RELATED PARTY
Due to related party consists of 15 1/2% Subordinated Notes held by the
Apparel Partnership. Interest on the 15 1/2% Subordinated Notes is payable
annually in cash on each December 15. However, with respect to any such interest
amount payable prior to maturity, Playtex may elect and elected for periods
through
F-12
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. DUE TO RELATED PARTY (CONTINUED)
December 15, 1993 to make such payments in additional 15 1/2% Subordinated
Notes. On December 16, 1996 and December 15, 1995, Playtex paid in cash the
accrued interest for the annual periods then ended. Principal and any unpaid
accrued interest on the 15 1/2% Subordinated Notes are payable in cash on
December 15, 2003.
9. INCOME TAXES
The provision for income taxes is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to amounts that are
more likely than not to be realized.
Earnings (loss) before income taxes, cumulative effect of accounting changes
and extraordinary loss are as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
<S> <C> <C> <C>
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
U.S............................................... $ 32,650 $ 8,579 $ 51,049
Foreign........................................... 1,690 2,346 2,492
------------ ------------ ------------
Total............................................. $ 34,340 $ 10,925 $ 53,541
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Playtex's provisions for income taxes for the twelve months ended December
28, 1996, December 30, 1995, and December 31, 1994 are as follows (in
thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-----------------------------------------
<S> <C> <C> <C>
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------- ------------
Current:
Federal......................................... $ 7,851 $ 9,174 $ 3,750
State and local................................. 553 (2,123) (2,075)
Foreign......................................... 895 1,233 2,470
------------ ------ ------------
9,299 8,284 4,145
------------ ------ ------------
------------ ------ ------------
Deferred:
Federal......................................... 6,851 (82) 16,593
State and local................................. 311 (26) 4,439
Foreign......................................... (320) (25) (1,183)
------------ ------ ------------
6,842 (133) 19,849
------------ ------ ------------
Total....................................... $ 16,141 $ 8,151 $ 23,994
------------ ------ ------------
------------ ------ ------------
</TABLE>
F-13
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
Taxable and deductible temporary differences and tax credit carryforwards
which give rise to Playtex's deferred tax assets and liabilities at December 28,
1996 and December 30, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Allowances and reserves not currently deductible............... $ 12,468 $ 17,604
Net operating loss carryforwards............................... 6,185 6,745
Postretirement benefits reserve................................ 2,256 2,009
Capitalized book expenses for tax purposes..................... 675 581
State tax credits.............................................. 58 136
------------ ------------
Total...................................................... $ 21,642 $ 27,075
------------ ------------
------------ ------------
Deferred tax liabilities:
Deferred gain on sale of business.............................. $ 14,650 $ 14,650
Property, plant and equipment.................................. 8,845 8,052
Trademarks..................................................... 5,139 4,222
Undistributed earnings of foreign subsidiary................... 2,622 2,836
Other.......................................................... 480 567
------------ ------------
Total...................................................... $ 31,736 $ 30,327
------------ ------------
------------ ------------
</TABLE>
Undistributed earnings of the Company's Canadian subsidiary for which U.S.
income taxes have not been provided were approximately $3.5 million at December
28, 1996. Such undistributed earnings are expected to be permanently reinvested
in the Canadian subsidiary.
At the time of its acquisition, BBH had net operating loss carryforwards of
$18.4 million that expire in years 2007 through 2010. These net operating loss
carryforwards can be utilized by Playtex, with certain limitations, on its
federal, state and local tax return for tax periods subsequent to October 31,
1995. Playtex expects to fully utilize these net operating loss carryforwards
prior to their expiration.
F-14
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
The Company's tax provision differed from the amount computed using the
federal statutory rate of 35% as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
<S> <C> <C> <C>
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
Expected federal income tax at statutory rates........................ $ 12,019 $ 3,824 $ 18,739
Amortization and write-off of intangible assets....................... 3,618 5,647 3,436
Settlement of tax examinations........................................ -- (2,385) (1,498)
State and local income taxes.......................................... 562 786 2,993
Foreign tax rate differential......................................... 279 331 362
Effect on deferred taxes due to change in Canada withholding tax
rates............................................................... (214) -- --
Other, net............................................................ (123) (52) (38)
------------ ------------ ------------
Total tax provision............................................. $ 16,141 $ 8,151 $ 23,994
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
During 1995 and 1994, several state jurisdictions concluded their
examinations of tax returns filed by Playtex or its subsidiaries for various
years 1987 through 1992 or the statute of limitations related to other specific
situations lapsed. As a result of these favorable developments, Playtex recorded
a $2.4 million and a $1.5 million tax benefit in the provision for income taxes
for the years ended December 30, 1995 and December 31, 1994, respectively.
10. COMMON STOCK
During 1994, the Company established a long-term incentive plan (the "1994
Stock Option Plan") under which awards of incentive stock options, nonqualified
stock options and stock appreciation rights ("SARs") may be granted to directors
and key employees of the Company. Stock options granted under the 1994 Stock
Option Plan may have a term not in excess of ten years. The exercise price for
stock options may not be less than the fair market value of the common stock on
the date of grant. Except with respect to formula grants to certain non-employee
directors, options vest over a period determined by the Compensation and Stock
Option Committee.
SARs may be granted in tandem with a stock option grant or at any time
following the stock option grant. Upon exercise of a SAR, the grantee will
receive cash equal to the excess of the fair market value of a share of common
stock over the exercise price. No SARs have been granted.
On June 6, 1995, the Company's stockholders approved an amendment to the
1994 Stock Option Plan increasing the number of shares of common stock available
for issuance upon exercise of options and SARs from 1,047,785 to 3,047,785 and
increasing the number of shares available for issuance upon exercise of options
and SARs grants to any single executive officer from 300,000 to 1,000,000.
In 1996, the Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS 123"). As permitted by SFAS 123, the Company will continue
to follow the provisions of APB No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES
and related interpretations in accounting for compensation expense related to
the issuance of stock options. Had compensation costs related to the issuance of
stock options under the Company's 1994 Stock Option Plan been determined based
on the estimated fair value at the grant dates for awards under SFAS 123, the
Company's net income and earnings per share for the
F-15
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMON STOCK (CONTINUED)
twelve months ended December 28, 1996 and December 30, 1995 would have been
reduced to the pro forma amounts listed below:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
Net income (loss) to common shareholders
As reported.................................................... $ 18,199 $ (5,161)
Pro forma...................................................... $ 15,649 $ (6,611)
Earning per share (primary & fully diluted)
As reported.................................................... $ 0.36 $ (0.12)
Pro forma...................................................... $ 0.31 $ (0.16)
</TABLE>
The fair value of each stock option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
weighted average risk-free interest rates of 6.63% and 6.26% for fiscal 1996 and
1995, respectively; no dividend yield; expected lives of 5 years; and volatility
of 35%.
A summary of the status of the 1994 Stock Option Plan for fiscal 1996, 1995
and 1994 and the changes during those years is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- ----------- ---------- ----------- --------- -----------
Outstanding at beginning of year.................... 2,240,800 $ 9.17 297,500 $ 12.21 -- $ --
Granted............................................. 166,000 8.76 2,080,700 8.82 321,500 12.27
Exercised........................................... (7,499) 7.87 -- -- -- --
Forfeited........................................... (83,867) 9.47 (137,400) 10.43 (24,000) 13.00
---------- ---------- ---------
Outstanding at end of year.......................... 2,315,434 9.14 2,240,800 9.17 297,500 12.21
---------- ---------- ---------
---------- ---------- ---------
Options exercisable at year-end..................... 715,452 9.37 76,348 11.98 None
Weighted-average fair value of options granted
during the year................................... $ 4.40 $ 4.43
</TABLE>
F-16
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMON STOCK (CONTINUED)
The following table summarizes information about fixed stock options
outstanding at December 28, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE AT CONTRACTUAL EXERCISE AT EXERCISE
PRICES 12/28/96 LIFE PRICES 12/28/96 PRICES
- ------------------- ----------- --------------- ---------- ----------- ----------
$6.000 to 7.000..... 37,500 7.96 $ 6.7500 25,000 $ 6.7500
$7.000 to 8.000..... 971,834 8.61 7.8750 320,228 7.8750
$8.000 to 9.000..... 166,000 9.40 8.6528 3,000 8.2500
$9.000 to 10.000.... 800,000 8.48 9.8750 200,000 9.8750
$10.000 to 13.000... 340,100 7.92 11.5134 167,224 12.0250
----------- -----------
$6.750 to 13.000.... 2,315,434 8.51 9.1379 715,452 9.3663
----------- -----------
----------- -----------
</TABLE>
11. WRITE-OFF OF SMILETOTE INTANGIBLE ASSETS
During the fourth quarter of fiscal 1995 and in connection with certain
strategic decisions regarding the SMILETOTE product line, the Company prepared
financial projections to evaluate the SMILETOTE business in terms of projected
net earnings and operating cash flows. Based upon the projections of
undiscounted operating earnings before amortization of intangible assets and
after considering interest on indebtedness, management concluded that the
unamortized value of the intangible assets associated with SMILETOTE had been
permanently impaired. Consequently, the Company wrote off in the fourth quarter
of fiscal 1995 the remaining $6.4 million of intangible assets associated with
SMILETOTE.
12. EXTRAORDINARY LOSS
In June 1995, in connection with the 1995 Transaction, Playtex recorded an
extraordinary loss of $7.9 million (net of income tax benefit of $5.2 million)
for costs and expenses related to the write-off of the unamortized portion of
deferred financing costs associated with the 1994 Credit Agreement. See notes 2
and 7.
13. LEASES
Future minimum payments under non-cancelable operating leases for years
after December 28, 1996 are as follows (in thousands): $3,430 in 1997, $3,560 in
1998, $3,010 in 1999, $2,472 in 2000, $2,472 in 2001 and $5,573 in later years.
Rent expense for operating leases amounted to (in thousands): $5,201,
$5,092, and $4,240 for the twelve months ended December 28, 1996, December 30,
1995, and December 31, 1994, respectively.
14. PENSION AND OTHER POSTRETIREMENT BENEFITS
PENSION PLANS--Substantially all Playtex U.S. hourly and approximately 78%
of all Canadian employees participate in pension plans. At December 28, 1996,
approximately 1,112 employees were covered by these plans, of which
approximately 189 retirees or beneficiaries were receiving benefits.
F-17
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
Changes in pension benefits, which are allocable to previous service of
employees, and gains and losses that occur because actual experience differs
from assumptions will be amortized over the estimated average future service
period of employees. Actuarial assumptions for the plans include: (a) 8% for the
expected long-term rate of return on plans assets, (b) 7.5% for the discount
rate for calculating the projected benefit obligation and (c) 3.25% for the rate
of average future increases in compensation levels.
Net pension expense (income) for the twelve months ended December 28, 1996,
December 30, 1995, and December 31, 1994 includes the following components (in
thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
<S> <C> <C> <C>
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
Service cost-benefits
earned during the period............................................ $ 721 $ 616 $ 622
Interest cost on projected
benefit obligation.................................................. 1,688 1,559 1,414
Actual return on plan assets.......................................... (3,711) (6,000) 872
Amortization of prior
service cost........................................................ 73 73 59
Amortization of unrecognized
net gain............................................................ (51) (2) (106)
Amortization of transition
gain over 10 years.................................................. (193) (193) (192)
Excess (shortfall) of actual return
on plan assets over estimated....................................... 1,479 4,190 (2,797)
------------ ------------ ------------
Net pension expense (income)...................................... $ 6 $ 243 $ (128)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-18
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
A reconciliation of the projected benefit obligation for the pension plans
to the prepaid pension expense recorded at December 28, 1996 and December 30,
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
Projected benefit obligation for
service rendered to date........................................................... $ (24,347) $ (22,740)
Plan assets at fair value, primarily
listed stocks, money market funds
and guaranteed investment contracts................................................ 31,171 28,313
------------ ------------
Plan assets in excess of projected
benefit obligation................................................................. 6,824 5,573
Unrecognized net gain from past
experience different from that assumed
and effects of changes in assumptions.............................................. (4,398) (3,019)
Prior service cost not yet recognized
in net periodic pension cost....................................................... 365 438
Unrecognized transition gain......................................................... (395) (589)
------------ ------------
Prepaid pension expense.............................................................. $ 2,396 $ 2,403
------------ ------------
------------ ------------
</TABLE>
The portion of the projected benefit obligation at December 28, 1996 and
December 30, 1995 representing the accumulated benefit obligation was $22.0
million, of which $21.2 million was vested, and $20.6 million, of which $19.8
million was vested, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS--Playtex provides
Company-sponsored postretirement health care and life insurance benefits to
certain U.S. retirees. These plans require employees to share in the costs.
Approximately 89% of all U.S. personnel may become eligible for
Company-sponsored post-retirement health care and life insurance if they were to
retire from the Company. The cost of providing Company-sponsored postretirement
health care and life insurance benefits for U.S. retirees was approximately $0.8
million for each of the twelve months ended December 28, 1996, December 30,
1995, and December 31, 1994. The Company accrues the estimated cost of these
benefits during the participants' active service periods up to the dates on
which they become eligible for full benefits.
Playtex also provides two non-contributory defined contribution plans and a
contributory 401(k) plan covering various employee groups. The amounts charged
to earnings for Playtex's defined contribution plans totaled $4.6 million, $4.7
million, and $4.2 million for the twelve months ended December 28, 1996,
December 30, 1995, and December 31, 1994, respectively.
15. RELATED PARTY TRANSACTIONS
Joel E. Smilow, a director and former senior executive officer of Playtex
and Hercules P. Sotos, former director and senior executive officer of Playtex,
are general partners of the Apparel Partnership, holding beneficial interests of
58.5% and 13.5%, respectively, in the Apparel Partnership. Under a consulting
agreement, which commenced in the third quarter of 1995, the Company has
retained Mr. Smilow as a consultant for a five-year period at an annual fee of
$250,000 plus expenses and certain benefits. The
F-19
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. RELATED PARTY TRANSACTIONS (CONTINUED)
consulting agreement does not require Mr. Smilow to devote any minimum amount of
time to the performance of consulting services.
On October 31, 1995, Playtex and a wholly-owned subsidiary acquired all
issued and outstanding common shares of BBH not previously owned by Playtex.
Prior to the BBH Acquisition, BBH was controlled by Thomas Lee Equity Partners,
L.P. and certain employees and affiliates of the Thomas H. Lee Company. Thomas
H. Lee, President of the Thomas H. Lee Company, is a director and a significant
stockholder of Playtex. Beginning in December 1992, Playtex had a distribution
agreement with Sun Pharmaceuticals Corp. ("Sun"), a wholly-owned subsidiary of
BBH, pursuant to which Playtex was the exclusive distributor of BANANA BOAT
products in all of the areas Sun had repurchased distribution rights from its
then current distributors. Concurrent with the acquisition, the distribution
agreement between Sun and Playtex was canceled. For the ten months ended October
31, 1995 and for the twelve months ended December 31, 1994 Playtex purchased
$30.1 million and $30.5 million, respectively, of BANANA BOAT products from Sun
and at December 31, 1994 Playtex had accounts payable to Sun of $3.9 million.
Playtex believes that the terms of all the arrangements with the Apparel
Partnership and BBH were fair to Playtex and comparable to those which could be
obtained from unrelated third parties.
16. BUSINESS AND CREDIT CONCENTRATIONS
Most of Playtex's customers are disbursed throughout the United States and
Canada. No single customer accounted for more than 10% of Playtex's net sales in
1996, 1995, or 1994 with the exception of Wal-Mart Stores, Inc. ("Wal-Mart")
(approximately 18% in 1996, 17% in 1995, and 15% in 1994 ). At December 28, 1996
and December 30, 1995, no account receivable from any customer was significant,
except for Wal-Mart (approximately $11.9 million in 1996 and $11.1 million in
1995). Aggregate receivables from high risk customers are not considered
significant and Playtex estimates, based upon past experience, that it has
sufficient reserves to cover any losses arising from any such accounts.
17. DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
CASH, RECEIVABLES, ACCOUNTS PAYABLE, INCOME TAXES AND ACCRUED EXPENSES--The
carrying amounts approximate fair value because of the short-term maturity of
these instruments.
1995 CREDIT AGREEMENT--The carrying amounts approximate fair value because
the rate of interest on borrowings under the 1995 Credit Agreement is, at
Playtex's option, a function of various alternative short-term borrowing rates,
as defined in the 1995 Credit Agreement.
INTEREST RATE PROTECTION AGREEMENTS--The fair value of interest rate
protection agreements is the estimated amount that Chase Manhattan Bank would
receive or pay to terminate the interest rate protection agreements at the
balance sheet date, taking into account current interest rates and the current
creditworthiness of the interest rate protection agreement counterparties.
Termination of the interest rate protection agreements at December 28, 1996
would require Playtex to pay the Chase Manhattan Bank $1.6 million.
F-20
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
LONG-TERM DEBT AND OTHER FINANCIAL INSTRUMENTS--The fair value of the
following financial instruments was estimated at December 28, 1996 and December
30, 1995 as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, 1996 DECEMBER 30, 1995
---------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
9% Senior Subordinated Notes (a)....................... $ 360,000 $ 353,400 $ 360,000 $ 317,700
15% Notes due from
Playtex Apparel Partners, L.P. (b)................... 80,017 80,017 80,017 80,017
15 1/2% Subordinated Notes due to
Playtex Apparel Partners, L.P. (b)................... 78,386 78,386 78,386 78,386
Other noncurrent assets (c)............................ 4,224 4,100 4,403 4,270
Noncurrent liabilities (c)............................. 14,207 12,930 16,784 15,270
</TABLE>
- ------------------------
(a) At December 28, 1996 and December 30, 1995, the estimates were based on the
average range of bid/ ask quotes provided by independent securities dealers.
(b) The estimated fair value approximates the carrying amount at December 28,
1996 and December 30, 1995, based on the amount of future cash flows
associated with these instruments, discounted using an appropriate interest
rate.
(c) The fair values are based on a combination of actual cost associated with
recent purchases or the amount of future cash flows discounted using
Playtex's borrowing rate for similar instruments.
18. INFORMATION BY MAJOR GEOGRAPHIC SEGMENT
Net sales by geographic area represent sales to unaffiliated customers only.
Intergeographic sales and transfers between geographic areas are nominal and
have not been disclosed separately.
Operating earnings is defined as total revenue less operating expenses. In
computing operating earnings, interest and income taxes have not been deducted.
Identifiable assets by geographic area represent those assets that are used
in Playtex's operations in each area.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
(IN THOUSANDS)
Sales:
United States....................................................... $ 459,075 $ 445,880 $ 436,091
Canada.............................................................. 39,667 37,701 37,184
------------ ------------ ------------
$ 498,742 $ 483,581 $ 473,275
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-21
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. INFORMATION BY MAJOR GEOGRAPHIC SEGMENT (CONTINUED)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
(IN THOUSANDS)
Operating earnings:
United States............................................. $ 97,702 $ 80,085 $ 127,136
Canada.................................................... 1,498 2,201 2,558
------------ ------------ ------------
$ 99,200 $ 82,286 $ 129,694
------------ ------------ ------------
------------ ------------ ------------
Identifiable assets (at period end):
United States............................................. $ 647,629 $ 671,722 $ 589,649
Canada.................................................... 12,702 11,139 9,751
------------ ------------ ------------
$ 660,331 $ 682,861 $ 599,400
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
19. QUARTERLY DATA (UNAUDITED)
The following is a summary of the quarterly results of operations and market
price data for the Company for the twelve months ended December 28, 1996 and
December 30, 1995:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Fiscal 1996
Net sales......................................... $ 143,067 $ 131,872 $ 117,500 $ 106,303
Operating earnings................................ 27,841 26,735 26,334 18,290
Net earnings...................................... 5,981 5,489 5,408 1,321
Earnings per share: (a)
Net earnings.................................... $ .12 $ .11 $ .11 $ .03
Market price--high................................ $ 85/8 $ 103/8 $ 91/2 $ 91/2
--low.................................. $ 65/8 $ 71/8 $ 71/2 $ 71/8
Fiscal 1995
Net sales......................................... $ 132,767 $ 135,627 $ 111,744 $ 103,443
Operating earnings (loss)......................... 27,259 30,199 25,433 (605)
Earnings (loss) before extraordinary items........ 3,753 6,521 5,488 (12,988)
Net earnings (loss)............................... 3,753 (1,414) 5,488 (12,988)
Earnings (loss) per share: (a)
Before extraordinary items...................... $ .12 $ .18 $ .11 $ (.26)
Net earnings (loss)............................. $ .12 $ (.04) $ .11 $ (.26)
Market price--high................................ $ 85/8 $ 101/4 $ 121/2 $ 9
--low.................................. $ 63/4 $ 71/2 $ 83/8 $ 61/2
</TABLE>
- ------------------------
(a) Per share data is computed independently for each of the periods presented;
therefore, the sum of the earnings per share amounts for the quarters may
not equal the total for the year.
F-22
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The 9% Notes are guaranteed by certain wholly-owned subsidiaries of the
Company (the "Guarantors"), namely Playtex Sales & Services, Inc. ("PSSI"),
Playtex Manufacturing, Inc. ("PMI") and Sun Pharmaceuticals Corp. ("Sun"). The
remaining first tier and lower tier subsidiaries of the Company are not
guarantors of the 9% Notes (the "Non-Guarantors"). PSSI provides sales
solicitation, management and administrative services to Playtex and its U.S.
affiliates. PMI is a contract manufacturer and contract research and development
services provider for Playtex and its U.S. affiliates. Sun owns the BANANA BOAT
trade name and certain other intangible assets associated with the BANANA BOAT
business. Sun distributes its product outside the U.S. and Puerto Rico and to
certain U.S. distributors excluding Playtex. Sun has entered into license
agreements with Playtex and other unrelated licensors for the right to use the
BANANA BOAT trade name and intangible assets associated with the BANANA BOAT sun
and skin care business and manufacture and distribute BANANA BOAT products.
The Non-Guarantors include Playtex Beauty Care, Inc., a manufacturer and
distributor of JHIRMACK hair care products, Playtex Investment Corporation, an
investment holding company which holds the 15% debentures issued by Playtex
Apparel Partners, L.P. due December 15, 2003, Playtex International Corp., sole
shareholder of Playtex Limited, a manufacturer and distributor of Playtex
products in Canada, Smile-Tote, Inc., owner of certain Infant Care related
intangible assets, T H Marketing Corp., sole shareholder of Playtex Foreign
Sales Corporation, and Playtex Foreign Sales Corporation, a foreign sales
corporation as defined by Internal Revenue Code Section 922.
The Guarantors are joint and several guarantors of the 9% Notes. Such
guarantees are joint and several obligations of the Guarantors, irrevocable and
full and unconditional, limited to the largest amount that would not render such
Guarantors' obligations under the guarantees subject to avoidance under any
applicable federal or state fraudulent conveyance or similar law. The guarantees
are senior subordinated obligations of the applicable Guarantor, and are
subordinated to all senior obligations of such Guarantor, including guarantees
of the Company's obligations under the 1995 Credit Agreement.
The Notes contain certain restrictions and limitations, which, among other
things, restrict the type and/or amount of additional indebtedness that may be
incurred by Playtex or its subsidiaries, payment of dividends and other
distributions, issuances of preferred stock; loans and advances; certain
transactions with Playtex stockholders and affiliates; certain mergers and
consolidations; certain sales or transfers of assets; the creation of certain
liens; the transfer of assets to certain subsidiaries; and restrictions on
dividends and other distributions by subsidiaries, including the Guarantors.
The information which follows presents condensed financial information as of
December 28, 1996 and December 30, 1995 of (a) the Company on a consolidated
basis, (b) the parent company only ("Parent Company"), (c) the combined
Guarantors, and (d) the combined Non-Guarantors.
F-23
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 28, 1996
(In thousands)
<TABLE>
<CAPTION>
CONSOLI- ELIMINA- PARENT COMBINED NON-
ASSETS DATED TIONS COMPANY GUARANTORS GUARANTORS
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets......................................... $ 122,491 $ -- $ 66,474 $ 39,436 $ 16,581
Investment in subsidiaries............................. -- (70,924) 70,924 -- --
Intercompany receivable................................ -- (126,773) 120,717 5,717 339
Net property, plant and equipment...................... 53,408 -- 309 51,743 1,356
Intangible assets...................................... 384,854 -- 316,057 66,749 2,048
Other noncurrent assets................................ 99,578 (504) 19,556 -- 80,526
--------- --------- --------- ----------- -----------
Total assets..................................... $ 660,331 $(198,201) $ 594,037 $ 163,645 $ 100,850
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities.................................... $ 115,969 $ -- $ 69,584 $ 39,723 $ 6,662
Intercompany payable................................... -- (126,773) -- -- 126,773
Long-term debt......................................... 793,086 -- 793,086 -- --
Other noncurrent liabilities........................... 34,003 (504) 14,094 2,966 17,447
--------- --------- --------- ----------- -----------
Total liabilities................................ 943,058 (127,277) 876,764 42,689 150,882
Stockholders' equity................................... (282,727) (70,924) (282,727) 120,956 (50,032)
--------- --------- --------- ----------- -----------
Total liabilities and stockholders' equity....... $ 660,331 $(198,201) $ 594,037 $ 163,645 $ 100,850
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
</TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 30, 1995
(In thousands)
<TABLE>
<CAPTION>
CONSOLI- ELIMINA- PARENT COMBINED NON-
ASSETS DATED TIONS COMPANY GUARANTORS GUARANTORS
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets......................................... $ 130,848 $ (460) $ 112,969 $ 1,303 $ 17,036
Investment in subsidiaries............................. -- (68,280) 68,280 -- --
Intercompany receivable................................ -- (127,210) 126,955 -- 255
Net property, plant and equipment...................... 52,462 -- 201 50,757 1,504
Intangible assets...................................... 397,705 -- 326,752 68,837 2,116
Other noncurrent assets................................ 101,846 (505) 21,832 -- 80,519
--------- --------- --------- ----------- -----------
Total assets..................................... $ 682,861 $(196,455) $ 656,989 $ 120,897 $ 101,430
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities.................................... $ 102,211 $ (460) $ 94,762 $ -- $ 7,909
Intercompany payable................................... -- (127,210) -- -- 127,210
Long-term debt......................................... 848,436 -- 848,436 -- --
Other noncurrent liabilities........................... 33,190 (505) 14,767 2,271 16,657
--------- --------- --------- ----------- -----------
Total liabilities................................ 983,837 (128,175) 957,965 2,271 151,776
Stockholders' equity................................... (300,976) (68,280) (300,976) 118,626 (50,346)
--------- --------- --------- ----------- -----------
Total liabilities and stockholders' equity....... $ 682,861 $(196,455) $ 656,989 $ 120,897 $ 101,430
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
</TABLE>
F-24
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996:
(In thousands)
<TABLE>
<CAPTION>
CONSOLI- ELIMINA- PARENT COMBINED NON-
DATED TIONS COMPANY GUARANTORS GUARANTORS
---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues...................................... $ 498,742 $ (167,269) $ 438,127 $ 168,890 $ 58,994
Cost of sales..................................... 192,512 (104,374) 161,849 108,699 26,338
---------- ----------- ---------- ----------- -----------
Gross profit.................................... 306,230 (62,895) 276,278 60,191 32,656
Operating expenses:
Advertising, selling and administrative........... 194,184 (62,895) 171,534 53,666 31,879
Amortization of intangibles....................... 12,846 -- 10,570 2,208 68
---------- ----------- ---------- ----------- -----------
Total operating expenses........................ 207,030 (62,895) 182,104 55,874 31,947
---------- ----------- ---------- ----------- -----------
Operating earnings.............................. 99,200 -- 94,174 4,317 709
Interest expense, net............................. 64,860 -- 76,864 (1) (12,003)
Equity in net earnings of subsidiaries............ -- 10,456 (10,456) -- --
---------- ----------- ---------- ----------- -----------
Earnings before income taxes...................... 34,340 (10,456) 27,766 4,318 12,712
Income taxes...................................... 16,141 -- 9,567 1,988 4,586
---------- ----------- ---------- ----------- -----------
Net income........................................ $ 18,199 $ (10,456) $ 18,199 $ 2,330 $ 8,126
---------- ----------- ---------- ----------- -----------
---------- ----------- ---------- ----------- -----------
</TABLE>
F-25
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 1995:
(In thousands)
<TABLE>
<CAPTION>
CONSOLI- ELIMINA- PARENT COMBINED NON-
DATED TIONS COMPANY GUARANTORS GUARANTORS
---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $ 483,581 $ (7,427) $ 417,894 $ 1,367 $ 71,747
Cost of sales........................................ 188,129 (6,365) 163,233 1,227 30,034
---------- --------- ---------- ----------- -----------
Gross profit....................................... 295,452 (1,062) 254,661 140 41,713
Operating expenses:
Advertising, selling and administrative.............. 195,457 (1,062) 152,975 830 42,714
Amortization of intangibles.......................... 17,709 -- 10,427 365 6,917
---------- --------- ---------- ----------- -----------
Total operating expenses........................... 213,166 (1,062) 163,402 1,195 49,631
---------- --------- ---------- ----------- -----------
Operating earnings................................. 82,286 -- 91,259 (1,055) (7,918)
Interest expense, net................................ 71,361 -- 83,326 -- (11,965)
Equity in net earnings of subsidiaries............... -- (808) 808 -- --
---------- --------- ---------- ----------- -----------
Earnings (loss) before income taxes and
extraordinary loss............................... 10,925 808 7,125 (1,055) 4,047
Income taxes......................................... 8,151 -- 4,351 (341) 4,141
---------- --------- ---------- ----------- -----------
Earnings (loss) before extraordinary loss.......... 2,774 808 2,774 (714) (94)
Extraordinary loss on early retirement of debt, net
of $5,180 tax benefit.............................. (7,935) -- (7,935) -- --
---------- --------- ---------- ----------- -----------
Net loss........................................... $ (5,161) $ 808 $ (5,161) $ (714) $ (94)
---------- --------- ---------- ----------- -----------
---------- --------- ---------- ----------- -----------
</TABLE>
F-26
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996:
(In thousands)
<TABLE>
<CAPTION>
CONSOLI- ELIMINA- PARENT COMBINED NON-
DATED TIONS COMPANY GUARANTORS GUARANTORS
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings......................................... $ 18,199 $ (10,456) $ 18,199 $ 2,330 $ 8,126
Non-cash items included in earnings:
Amortization of intangibles........................ 12,846 -- 10,570 2,208 68
Amortization of deferred financing costs........... 2,089 -- 2,089 -- --
Depreciation....................................... 8,929 -- 72 8,428 429
Deferred taxes..................................... 6,842 -- 7,963 (1,449) 328
Other, net......................................... 48 10,456 (10,279) (120) (9)
Decrease (increase) in net working capital........... 11,351 -- 13,273 (1,983) 61
---------- ---------- ---------- ----------- -----------
Net cash flows from operations....................... 60,304 -- 41,887 9,414 9,003
---------- ---------- ---------- ----------- -----------
Cash flows (used for) investing activities:
Purchase of property, plant and equipment.......... (9,740) -- (45) (9,414) (281)
---------- ---------- ---------- ----------- -----------
Net cash flows used for investing activities......... (9,740) -- (45) (9,414) (281)
---------- ---------- ---------- ----------- -----------
Cash flows from (used for) financing activities:
Net payments under working capital facilities and
long-term debt obligations....................... (50,350) -- (50,350) -- --
Issuance of shares of common stock, net............ 60 -- 60 -- --
(Payment) receipt of dividends..................... -- -- 7,802 -- (7,802)
Other, net......................................... (9) -- (9) -- --
---------- ---------- ---------- ----------- -----------
Net cash flows used for financing activities..... (50,299) -- (42,497) -- (7,802)
---------- ---------- ---------- ----------- -----------
Increase (decrease) in cash.......................... 265 -- (655) -- 920
Cash at beginning of period.......................... 5,940 -- 1,834 -- 4,106
---------- ---------- ---------- ----------- -----------
Cash at end of period................................ $ 6,205 $ -- $ 1,179 $ -- $ 5,026
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
</TABLE>
F-27
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 1995:
(In thousands)
<TABLE>
<CAPTION>
CONSOLI- ELIMINA- PARENT COMBINED NON-
DATED TIONS COMPANY GUARANTORS GUARANTORS
---------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net loss.............................................. $ (5,161) $ 808 $ (5,161) $ (714) $ (94)
Non-cash items included in earnings:
Extraordinary loss.................................. 7,935 -- 7,935 -- --
Write-off of SMILETOTE intangibles.................. 6,441 -- -- -- 6,441
Amortization of intangibles......................... 11,268 -- 10,424 368 476
Amortization of deferred financing costs............ 2,246 -- 2,246 -- --
Depreciation........................................ 8,496 -- 8,000 -- 496
Deferred taxes...................................... (133) -- 1,039 -- (1,172)
Other, net.......................................... (291) (808) 268 -- 249
Decrease (increase) in net working capital............ (3,722) -- (6,443) (391) 3,112
---------- ----- ---------- ----- -----------
Net cash flows from operations.................... 27,079 -- 18,308 (737) 9,508
---------- ----- ---------- ----- -----------
Cash flows (used for) investing activities:
Purchase of property, plant and equipment........... (12,395) -- (12,296) -- (99)
Business or investments acquired.................... (94,429) 737 (95,166) -- --
---------- ----- ---------- ----- -----------
Net cash flows used for investing activities........ (106,824) 737 (107,462) -- (99)
---------- ----- ---------- ----- -----------
Cash flows from (used for) financing activities:
Net payments under working capital facilities and
long-term debt obligations........................ (85,650) -- (85,650) -- --
Payment of financing costs.......................... (9,113) -- (9,113) -- --
Issuance of shares of common stock, net............. 170,000 -- 170,000 -- --
(Payment) receipt of dividends...................... -- -- 7,802 -- (7,802)
Other, net.......................................... 75 -- 75 -- --
---------- ----- ---------- ----- -----------
Net cash flows used for financing activities........ 75,312 -- 83,114 -- (7,802)
---------- ----- ---------- ----- -----------
Increase (decrease) in cash........................... (4,433) 737 (6,040) (737) 1,607
Cash at beginning of period........................... 10,373 (737) 7,874 737 2,499
---------- ----- ---------- ----- -----------
Cash at end of period................................. $ 5,940 $ -- $ 1,834 $ -- $ 4,106
---------- ----- ---------- ----- -----------
---------- ----- ---------- ----- -----------
</TABLE>
F-28
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors and Stockholders
Playtex Products, Inc.
Under date of February 7, 1997, we reported on the consolidated balance
sheets of Playtex Products, Inc. and subsidiaries as of December 28, 1996 and
December 30, 1995, and the related consolidated statements of operations,
redeemable preferred stocks, common stock and other stockholders' equity, and
cash flows for the twelve months ended December 28, 1996, December 30, 1995 and
December 31, 1994, as contained in the 1996 Annual Report to Stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the Annual Report on Form 10-K for the fiscal year 1996. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedule for
the twelve months ended December 28, 1996, December 30, 1995, and December 31,
1994, as listed in Item 14(a)(2) of the Annual Report on Form 10-K for the
fiscal year 1996. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Stamford, Connecticut
February 7, 1997
S-1
<PAGE>
PLAYTEX PRODUCTS, INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
TWELVE MONTHS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO AT END
OF PERIOD INCOME DEDUCTIONS(1) OF PERIOD
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Receivables:
Allowances for doubtful accounts
December 31, 1994............................................ $ (2,149) $ (650) $ 453 $ (2,346)
December 30, 1995............................................ $ (2,346) $ (449) $ 753 $ (2,042)
December 28, 1996............................................ $ (2,042) $ (325) $ 609 $ (1,758)
</TABLE>
- ------------------------
(1) - Represents accouts written-off.
S-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER TO SELL OR SOLICITATION WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.......................... i
Incorporation of Certain Documents by
Reference.................................... ii
Special Note Regarding Forward-Looking
Statements................................... iii
Patents and Trademarks......................... iii
Prospectus Summary............................. 1
Risk Factors................................... 12
The Exchange Offer............................. 17
The Company.................................... 28
Use of Proceeds................................ 29
Capitalization................................. 30
Pro Forma Consolidated Financial Data.......... 31
Selected Historical Consolidated Financial
Data......................................... 36
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 39
Business....................................... 44
Management..................................... 53
Security Ownership of Certain Beneficial Owners
and Management............................... 56
Description of Certain Indebtedness............ 58
Description of the Senior Notes................ 60
Exchange Offer; Registration Rights............ 89
Certain Federal Income Tax Considerations...... 91
Erisa Considerations........................... 92
Plan of Distribution........................... 93
Legal Matters.................................. 94
Experts........................................ 94
Index to Financial Statements.................. F-1
</TABLE>
[LOGO]
PLAYTEX PRODUCTS, INC.
OFFER TO EXCHANGE ITS 8 7/8% SENIOR NOTES DUE 2004 SERIES B FOR ANY AND ALL
OUTSTANDING 8 7/8% SENIOR NOTES DUE 2004, SERIES A
------------------------------
PROSPECTUS
------------------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") grants a
Delaware corporation the power to indemnify any director, officer, employee or
agent against reasonable expenses (including attorneys' fees) incurred by him in
connection with any proceeding brought by or on behalf of the corporation and
against judgments, fines, settlements and reasonable expenses (including
attorneys' fees) incurred by him in connection with any other proceeding, if (a)
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and (b) in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Except as ordered by a court, however, no indemnification is to be
made in connection with any proceeding brought by or in the right of the
corporation where the person involved is adjudged to be liable to the
corporation.
Section 8 of the Company's restated certificate of incorporation and Section
13.1 of the Company's by-laws provide that the Company shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the corporation or is
or was serving at the written request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorney's fees) reasonably incurred by such person; provided,
however, that the Company shall be required to indemnify a person in connection
with a proceeding (or part thereof) initiated by such person only if the
proceeding (or part thereof) was authorized by the Board of Directors of the
corporation.
Section 102 of the DGCL permits the limitation of directors' personal
liability to the corporation or its stockholders for monetary damages for breach
of fiduciary duties as a director except for (i) any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of the law, (iii) breaches under section 174 of the DGCL, which relate to
unlawful payments of dividends or unlawful stock repurchase or redemptions, and
(iv) any transaction from which the director derived an improper personal
benefit.
Section 7 of the Company's restated certificate of incorporation limits the
personal liability of directors of the Company to the fullest extent permitted
by paragraph (7) of subsection (b) of section 102 of the DGCL.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
Pursuant to Section 8 of the Registration Rights Agreement, the Company and
the Guarantors have agreed to indemnify and hold harmless (i) each holder of an
Initial Note (a "Holder") and (ii) each person, if any, who controls (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
any Holder (any of the persons referred to in this clause (ii) being hereinafter
referred to as a "controlling person") and (iii) the respective officers,
directors, partners, employees, representatives and agents of any Holder or any
controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Holder"), to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities,
judgments, actions and expenses (including without limitation
II-1
<PAGE>
and as incurred, reimbursement of all reasonable costs of investigating,
preparing, pursuing or defending any claim or action, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
including the reasonable fees and expenses of counsel to any Indemnified Holder)
directly or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, preliminary prospectus or
Prospectus (or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the Holders
furnished in writing to the Company by any of the Holders expressly for use
therein.
The Company maintain directors' and officers' liability insurance for its
officers and directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
4.1 Indenture, dated July 21, 1997 between the Company, the Guarantors and
Marine Midland Bank, as Trustee (incorporated by reference to Exhibit 4.2 to
the Company's Current Report on Form 8-K dated July 21, 1997).
4.2 Form of Exchange Notes (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated July 21, 1997).
4.3 Registration Rights Agreement, dated July 21, 1997, among the Company, the
Guarantors and the Initial Purchaser (incorporated by reference to Exhibit 4.3 to the Company's
Current Report on Form 8-K dated July 21, 1997).
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to validity of the
Exchange Notes.*
10.1 Retention Agreement dated as of July 22, 1997 between Michael R. Gallagher and the Company.
10.2 Retention Agreement dated as of July 22, 1997 between Michael F. Goss and the Company.
10.3 Form of Retention Agreement dated as of July 22, 1997 between each of Richard G. Powers, Max R.
Recone and James S. Cook and the Company.
12 Statement of Computation of Ratios of Earnings to Fixed Charges.*
23.1 Consent of KPMG Peat Marwick LLP.*
23.2 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinion
filed as Exhibit 5.1 to this Registration Statement).
24 Powers of Attorney (included on signature pages of this Part II).*
25 Form T-1 Statement of Eligibility of Marine Midland Bank to act as trustee
under the Indenture.*
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the SEC are either not required under the related instructions,
are not applicable (and therefore have been omitted), or the required
disclosures are contained in the financial statements included herein.
II-2
<PAGE>
ITEM 22 UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the Registration
Statement.
(2) that, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange.
(d) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference in the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Westport,
Connecticut, on August 28, 1997.
PLAYTEX PRODUCTS, INC.
By: /s/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
*
- ----------------------------------- Chairman of the Board August 28, 1997
Robert B. Haas
/s/ MICHAEL R. GALLAGHER Chief Executive Officer
- ----------------------------------- (Principal Executive August 28, 1997
Michael R. Gallagher Officer)
Executive Vice President
* and
- ----------------------------------- Chief Financial Officer August 28, 1997
Michael F. Goss (Principal Financial and
Accounting Officer)
*
- ----------------------------------- Director August 28, 1997
Thomas H. Lee
*
- ----------------------------------- Director August 28, 1997
Kenneth F. Yontz
*
- ----------------------------------- Director August 28, 1997
Timothy O. Fisher
*
- ----------------------------------- Director August 28, 1997
Douglas D. Wheat
*
- ----------------------------------- Director August 28, 1997
Michael R. Eisenson
*
- ----------------------------------- Director August 28, 1997
C. Ann Merrifield
<TABLE>
<S> <C>
*By: /s/ MICHAEL R. GALLAGHER
---------------------------------------
Michael R. Gallagher,
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Westport,
Connecticut, on August 28, 1997.
PLAYTEX SALES & SERVICES, INC.
BY: /S/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
President
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ MICHAEL R. GALLAGHER President and Director
- ----------------------------------- (Principal Executive August 28, 1997
Michael R. Gallagher Officer)
Executive Vice President
* and Director
- ----------------------------------- (Principal Financial and August 28, 1997
Michael F. Goss Accounting Officer)
*
- ----------------------------------- Director August 28, 1997
Douglas D. Wheat
<TABLE>
<S> <C>
*By: /s/ MICHAEL R. GALLAGHER
---------------------------------------
Michael R. Gallagher,
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Westport,
Connecticut, on August 28, 1997.
PLAYTEX MANUFACTURING, INC.
BY: /S/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
President
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ MICHAEL R. GALLAGHER President and Director
- ----------------------------------- (Principal Executive August 28, 1997
Michael R. Gallagher Officer)
Executive Vice President
* and Director
- ----------------------------------- (Principal Financial and August 28, 1997
Michael F. Goss Accounting Officer)
*
- ----------------------------------- Director August 28, 1997
Douglas D. Wheat
<TABLE>
<S> <C>
*By: /s/ MICHAEL R. GALLAGHER
--------------------------------------
Michael R. Gallagher,
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Westport,
Connecticut, on August 28, 1997.
PLAYTEX BEAUTY CARE, INC.
BY: /S/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
President
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ MICHAEL R. GALLAGHER
- ----------------------------------- President (Principal August 28, 1997
Michael R. Gallagher Executive Officer)
Executive Vice President
* and Director
- ----------------------------------- (Principal Financial and August 28, 1997
Michael F. Goss Accounting Officer)
*
- ----------------------------------- Director August 28, 1997
Robert B. Haas
*
- ----------------------------------- Director August 28, 1997
Douglas D. Wheat
<TABLE>
<S> <C>
*By: /s/ MICHAEL R. GALLAGHER
--------------------------------------
Michael R. Gallagher,
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Westport,
Connecticut, on August 28, 1997.
SUN PHARMACEUTICALS CORP.
BY: /S/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
President
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ MICHAEL R. GALLAGHER
- ----------------------------------- President (Principal August 28, 1997
Michael R. Gallagher Executive Officer)
Executive Vice President
* and Director
- ----------------------------------- (Principal Financial and August 28, 1997
Michael F. Goss Accounting Officer)
*
- ----------------------------------- Director August 28, 1997
Douglas D. Wheat
*
- ----------------------------------- Director August 28, 1997
Max R. Recone
<TABLE>
<S> <C>
*By: /s/ MICHAEL R. GALLAGHER
--------------------------------------
Michael R. Gallagher,
Attorney-in-Fact
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Westport,
Connecticut, on August 28, 1997.
PLAYTEX INTERNATIONAL CORP.
BY: /S/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
President
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ MICHAEL R. GALLAGHER
- ----------------------------------- President (Principal August 28, 1997
Michael R. Gallagher Executive Officer)
* Executive Vice President
- ----------------------------------- (Principal Financial and August 28, 1997
Michael F. Goss Accounting Officer)
*
- ----------------------------------- Director August 28, 1997
Robert B. Haas
*
- ----------------------------------- Director August 28, 1997
Douglas D. Wheat
*
- ----------------------------------- Director August 28, 1997
James S. Cook
<TABLE>
<S> <C>
*By: /s/ MICHAEL R. GALLAGHER
--------------------------------------
Michael R. Gallagher,
Attorney-in-Fact
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Westport,
Connecticut, on August 28, 1997.
PLAYTEX INVESTMENT CORP.
BY: /S/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
President
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ MICHAEL R. GALLAGHER
- ----------------------------------- President (Principal August 28, 1997
Michael R. Gallagher Executive Officer)
* Executive Vice President
- ----------------------------------- (Principal Financial and August 28, 1997
Michael F. Goss Accounting Officer)
*
- ----------------------------------- Director August 28, 1997
Robert B. Haas
*
- ----------------------------------- Director August 28, 1997
Douglas D. Wheat
*
- ----------------------------------- Director August 28, 1997
James S. Cook
<TABLE>
<S> <C>
*By: /s/ MICHAEL R. GALLAGHER
--------------------------------------
Michael R. Gallagher,
Attorney-in-Fact
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Westport,
Connecticut, on August 28, 1997.
TH MARKETING CORP.
BY: /S/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
President
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ MICHAEL R. GALLAGHER
- ----------------------------------- President (Principal August 28, 1997
Michael R. Gallagher Executive Officer)
Executive Vice President
* and Director
- ----------------------------------- (Principal Financial and August 28, 1997
Michael F. Goss Accounting Officer)
*
- ----------------------------------- Director August 28, 1997
Robert B. Haas
*
- ----------------------------------- Director August 28, 1997
Douglas D. Wheat
<TABLE>
<S> <C>
*By: /s/ MICHAEL R. GALLAGHER
--------------------------------------
Michael R. Gallagher,
Attorney-in-Fact
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Westport,
Connecticut, on August 28, 1997.
SMILE-TOTE, INC.
BY: /S/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
President
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ MICHAEL R. GALLAGHER
- ----------------------------------- President (Principal August 28, 1997
Michael R. Gallagher Executive Officer)
Executive Vice President
* and Director
- ----------------------------------- (Principal Financial and August 28, 1997
Michael F. Goss Accounting Officer)
*
- ----------------------------------- Director August 28, 1997
Robert B. Haas
*
- ----------------------------------- Director August 28, 1997
Douglas D. Wheat
<TABLE>
<S> <C>
*By: /s/ MICHAEL R. GALLAGHER
--------------------------------------
Michael R. Gallagher,
Attorney-in-Fact
</TABLE>
II-12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.1 Indenture, dated July 21, 1997 between the Company, the Guarantors and Marine Midland Bank, as Trustee
(incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated July 21,
1997).
4.2 Form of Exchange Notes (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form
8-K dated July 21, 1997).
4.3 Registration Rights Agreement, dated July 21, 1997, among the Company, the Guarantors and the Initial
Purchaser (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K dated
July 21, 1997).
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to validity of the Exchange Notes.*
10.1 Retention Agreement dated as of July 22, 1997 between Michael R. Gallagher and the Company.
10.2 Retention Agreement dated as of July 22, 1997 between Michael F. Goss and the Company.
10.3 Form of Retention Agreement dated as of July 22, 1997 between each of Richard G. Powers, Max R. Recone
and James S. Cook and the Company.
12 Statement of Computation of Ratios of Earnings to Fixed Charges.*
23.1 Consent of KPMG Peat Marwick LLP.*
23.2 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinion filed as Exhibit 5.1 to
this Registration Statement).
24 Powers of Attorney (included on signature pages of this Part II).*
25 Form T-1 Statement of Eligibility of Marine Midland Bank to act as trustee under the Indenture.*
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
EXHIBIT 10.1
RETENTION AGREEMENT
This RETENTION AGREEMENT (the "Agreement") dated July 22,
1997, sets forth the mutual understanding regarding the special retention
incentives for Michael R. Gallagher (the "Executive") by Playtex Products, Inc.
(Playtex and its subsidiaries together called the "Company") in order to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a "Change of Control".
1. Definitions:
The terms "Cause", "Change of Control" and "Good Reason" are defined in
Exhibit I.
2. Severance Upon Termination Prior To A Change Of Control:
A. Termination By The Company (i) Without Cause, or
(ii) Due to Death or Disability:
If the Executive's employment is terminated by the Company without "Cause"
or due to death or "Disability" (as defined in Company's Long Term
Disability Policy) of Executive, but prior to the occurrence of a Change
of Control, the Executive shall be entitled to receive an amount equal to
two years' salary in effect at the time of the termination, plus two
years' bonus (equal to the highest annual bonus paid or payable to the
Executive in respect of the three most recent fiscal years ended prior to
the date of the Executive's termination of employment (the "Highest Annual
Bonus")), both payable in cash within 30 days of the date of Termination.
Such severance payments shall be in lieu of any severance payments
otherwise payable under the Memorandum of Understanding dated as of June
21, 1995 (the "Memorandum of Understanding") or any other plan or
arrangement of the Company concerning the Executive's termination of
employment, but without prejudice to the Executive's other rights, if any,
to other compensation under the Memorandum of Understanding and the
Company's other plans and arrangements, including, without limitation, the
Special Bonus and Price Based Incentive Arrangements ("Other
Compensation"). The Memorandum of Understanding is attached as Exhibit
III.
<PAGE>
2
B. Termination (i) By The Company For Cause, or (ii) By The Executive
Voluntarily:
The Executive shall be entitled to the severance compensation set forth in
Memorandum of Understanding and any other arrangement to which the
Executive is party and which is applicable to such termination of
employment, if any, but shall not be entitled to any other supplemental or
enhanced benefits hereunder.
3. Obligations Following A Change Of Control:
For purposes of this Agreement, obligations pursuant to a Change of
Control shall be considered to arise during the three month period
preceding an actual Change of Control and shall continue in the event of
the Executive's death or disability.
(i) Subject to, and expressly conditioned upon, the Executive's
continued compliance with the Non-Competition and Confidentiality
Agreement attached hereto as Exhibit II and incorporated herein by
reference, The Company shall pay the Executive an amount (the "Special
Termination Amount") equal to the sum of (a) three times Executive's
annual base salary at the time of the Change of Control or at the time of
termination (whichever is higher) plus (b) three times the Highest Annual
Bonus, payable in three equal annual installments in cash, with the first
installment to be paid within 30 days after the date of termination and
the succeeding installments to be paid on each of the first and second
anniversaries of the date of termination.
(ii) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the date of termination an amount equal to (a) a pro
rata portion of the Executive's annual base salary through the date of
termination, (b) a pro rata portion of the Highest Annual Bonus based upon
the percentage of the Company's fiscal year that shall have elapsed
through the date of termination, (c) a pro rata contribution to the
Company's Profit-Sharing and Deferred Benefit Equalization Plan with
respect to the Executive (with no duplication of benefits) for the current
fiscal year, and (d) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay.
(iii) For the three-year period following the date of termination,
the Company shall (a) continue medical, welfare and fringe benefits to the
Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies of the Company (as in at the time of the Change of
Control);
<PAGE>
3
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare and fringe
benefits under another employer provided plan, the medical and other
welfare and fringe benefits under another employer provided plan, the
medical and other welfare and fringe benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility, and (b) make equivalent payments to Executive equal
to the payments which would have been made under the Playtex
Profit-Sharing Plan and Deferred Benefits Equalization Plan with respect
to the Executive, payable when such payments are made under the respective
Plans.
Within 10 days following the occurrence of the Change of Control, the
Company shall create and fund a grantor trust (the "Trust") with an amount
equal to the present value of the Special Termination Amount. Any assets
held in the Trust shall be subject to the claims of the Company's general
creditors under federal and state laws if the Company becomes insolvent or
bankrupt (as defined in the Trust agreement).
The payments and benefits provided hereunder shall be in lieu of any
severance payments otherwise payable under the Memorandum of Understanding
dated as of June 21, 1995 (the "Memorandum of Understanding") or any other
plan or arrangement of the Company regarding the Executive's termination
of employment, but shall be without prejudice to the Executive's other
rights, if any, to other compensation under the Memorandum of
Understanding and the Company's other plans and arrangements, including
Other Compensation.
4. Special Payments Upon The Occurrence Of A Change of Control:
The Company shall pay the Executive a special bonus (the "Special Bonus")
in cash equal to the Highest Annual Bonus within 30 days following the
consummation of the Change of Control.
The Executive's accounts under the Playtex Products Profit-Sharing
Retirement Plan and Deferred Benefit Equalization Plan shall become fully
vested as of immediately prior to the consummation of the Change of
Control.
The Executive's outstanding stock options granted under the 1994 Playtex
Stock Option Plan shall become fully vested as of immediately prior to the
consummation of the Change of Control, provided, however, that such stock
options shall not vest on an accelerated basis if such acceleration is the
only factor which would prevent use of the pooling method of accounting in
connection with the Change in Control in which event, the invested options
must be exchanged for common stock of the acquiror of equal value.
<PAGE>
4
5. Certain Restrictions On Payment Of Compensation And Benefits:
Notwithstanding any other provision of this Agreement to the contrary, if
the Company determines (on the basis of advice from the Company's
independent public accountants) that part or all of the consideration,
compensation or benefits to be paid to Executive under this Agreement or
any other arrangement, plan or policy constitutes a "parachute payment"
under section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
("Code"), then the amounts constituting a "parachute payment" which would
otherwise be payable to or for the benefit of Executive shall be reduced
to the extent necessary so that the reduced payments do not constitute a
"parachute payment" (the "Reduced Amount"); provided that such amounts
shall not be so reduced if the Executive determines, based upon the advice
of an independent nationally recognized public accounting firm (which may,
but need not be the independent public accountants of the Company and the
costs of which will be paid by the Company), that without such reduction
the Executive would be entitled to receive and retain, on a net after-tax
basis (including, without limitation, any greater than the amount, on a
net after-tax basis, that the Executive would be entitled to retain upon
his receipt of the Reduced Amount. If, due to the uncertainty in the
application of Section 4999, payments are made to the Executive which
should not have been paid, such amount shall be treated as a loan to the
Executive, who shall repay it with interest at the applicable federal rate
provided for in section 7872(f)(2) of the Code; and if additional amounts
could have been paid to the Executive, the Company shall pay such amount
together with such interest provided for in section 7872(f)(2) of the
Code.
6. No Mitigation Or Setoffs:
The Executive shall not be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive
under this Agreement and, except as provided in Section 3(A)(iii)(a)
(relating to continuation of medical, welfare and fringe benefits), such
amounts shall not be reduced or subject to setoffs (whether or not the
Executive obtains other employment).
7. Confidential Information:
During the term of Executive's employment by the Company, Executive shall
keep secret and retain in strictest confidence, and shall not use for the
benefit of himself or others except in connection with the business and
affairs of the Company, all confidential matters of the Company and its
affiliates, including,
<PAGE>
5
without limitation, trade "know-how", secrets, consultant contracts,
customer lists, subscription lists, details of consultant contracts,
pricing policies, operations methods, marketing plans or strategies,
product development techniques or plans, business acquisition plans, new
personnel acquisition plans, methods of manufacture, technical processes,
designs and design projects, inventions and research projects and other
business affairs of the Company and its affiliates learned by Executive
heretofore or hereafter, and shall not disclose them to anyone outside of
the Company and its affiliates, either during or after employment by the
Company or any of its affiliates, except (i) as required in the course of
performing duties hereunder, (ii) with the Company's express written
consent, (iii) if such information is or becomes generally known by the
public other than as a result of a breach hereof or (iv) as required by
law or judicial or administrative process.
8. Miscellaneous:
A. Withholding:
The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
B. Governing Law/Amendment:
This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut, without reference to the principles of
conflict of laws. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
C. Enforceability:
The Company agrees to pay all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of the
outcome) by the Company or the Executive or others of the enforceability
of any provision of this Agreement, including the amount of any payment,
plus interest on any delayed payment.
D. Waiver:
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision.
The Executive's or
<PAGE>
6
the Company's failure to insist upon strict compliance with any provision
or the failure to assert any right shall not be deemed to be a waiver of
such provision or right.
E. Counterparts; Binding Effect:
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which taken together shall constitute
one and the same agreement. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
------------------------
Name: Michael F. Goss
Title: Executive Vice
President and
Chief Financial
Officer
By: /s/ Paul E. Yestrumskas
------------------------
Name: Paul E. Yestrumskas
Title: Vice President,
General Counsel and
Secretary
/s/ Michael R. Gallagher
--------------------------
Michael R. Gallagher
<PAGE>
EXHIBIT I
CERTAIN DEFINED TERMS
"CAUSE" shall mean (i) repeated violations by the Executive of the
Executive's duties to the Company (other than as a result of incapacity due to
physical or mental illness) which are demonstrably willful and deliberate on the
Executive's part, which are committed in bad faith or without reasonable belief
that such violations are in the best interests of the Company and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company specifying such violations and (ii) the Executive's conviction of a
felony involving the assets or business of the Company or its affiliates.
"CHANGE OF CONTROL" shall mean the occurrence of any of the
following:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14
(d) of the Exchange Act), is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have beneficial ownership of all shares that such Person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the voting stock
of the Company, (ii) the sale, lease, transfer, conveyance or other disposition,
in one or a series of related transactions, of all or substantially all of the
assets of the Company to any "person" or "group" (as such terms are used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than to any party or
parties to the Stock Purchase Agreement or their respective affiliates or (iii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Company (the "Board")
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of all the Directors or a majority of the Directors on either
the "Purchaser Nominating Committee" or the "Non-Purchaser Nominating Committee"
as such terms are defined by the Stock Purchase Agreement, in each case who were
either directors at the beginning of such period or were previously so elected
or nominated) cease for any reason to constitute a majority of the Board then in
office.
"GOOD REASON" shall mean any substantial diminution in the
Executive's title, duties, status, reporting relationship, authority, or
responsibilities, a reduction in the aggregate compensation and benefits
provided to the Executive by the Company and its affiliates from those earned by
the Executive at the time of the Change of Control, or a requirement that the
Executive's principal place of employment be relocated more than 35 miles from
his principal place of employment prior to the occurrence of a Change of
Control, which diminution, reduction or relocation is not remedied in a
reasonable period of time after receipt of written notice from the Executive
specifying such events.
<PAGE>
EXHIBIT II
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
This Non-Competition and Confidentiality Agreement is being entered
in connection with, and shall be deemed to form a part of, the Retention
Agreement dated as of July 22, 1997, between Playtex Products, Inc. and Michael
R. Gallagher (the "Retention Agreement"). Capitalized terms used herein without
definition have the respective meanings specified in the Retention Agreement.
I. Executive acknowledges and agrees that the principal businesses of
the Company are the production and sale of tampons, infant feeding and sun
protection products (collectively, the "Company Business"); (i) he is one of the
limited number of persons who has developed such business; (ii) the Company
Business is national and international in scope; and (iii) his work for the
Company has brought him and will continue to bring him into close contact with
many confidential affairs not readily available to the public. Accordingly, to
preserve the value of the Company in connection with any Change of Control, the
Executive covenants and agrees that:
A. NON-COMPETITION. During the term of Executive's employment by
the Company or any of its affiliates and for a period of five (5) years
following the termination of the Executive's employment under the circumstances
described in Section 3(A) of the Retention Agreement (relating to specified
terminations following a Change of Control) (the "Restricted Period"), Executive
shall not in the United States of America or in any foreign country, directly or
indirectly, (i) engage in the Company Business for his own account; (ii) enter
the employ of, or render any services to, any person engaged in such activities;
or (iii) become interested in any person engaged in the Company Business,
directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, employee, trustee, consultant or in any other
relationship or capacity; PROVIDED, HOWEVER, that Executive may own, directly,
or indirectly, solely as an investment, securities of any person which are
traded on any national securities exchange if Executive (a) is not a controlling
person of, or a member of a group which controls, such person or (b) does not,
directly or indirectly, own 1% or more of any class of securities of such
person.
B. CONFIDENTIAL INFORMATION. During the term of Executive's
employment by the Company or any of its affiliates and thereafter, Executive
shall keep secret and retain in strictest confidence, and shall not use for the
benefit of himself or others except in connection with the business and affairs
of the Company, all confidential matters of the Company and its affiliates,
including, without limitation, trade "know-how", secrets, consultant contracts,
customer lists, subscription lists, details of consultant contracts, pricing
policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans, new personnel
acquisition plans, methods of manufacture, technical processes, designs and
design projects, inventions and research projects and other business
i
<PAGE>
affairs of the Company and its affiliates learned by Executive heretofore or
hereafter, and shall not disclose them to anyone outside of the Company and its
affiliates, either during or after employment by the Company or any of its
affiliates, except (i) as required in the course of performing duties hereunder,
(ii) with the Company's express written consent, (iii) if such information is or
becomes generally known by the public other than as a result of a breach hereof
or of a similar Non-Competition and Confidentiality Agreement, or (iv) as
required by law or judicial or administrative process.
C. PROPERTY OF THE COMPANY. All memoranda, notes, lists, records
and other documents (and all copies thereof) made or compiled by Executive or
made available to Executive concerning the business of the Company or any of its
affiliates shall be the Company's property and shall be delivered to the Company
promptly upon the termination of Executive's employment with the Company or any
of its affiliates or at any other time on request. .
II. RIGHTS AND REMEDIES UPON BREACH. If Executive breaches, or
threatens to commit a breach of, any of the provisions of Paragraph I (the
"Restrictive Covenants"), the Company shall have the following rights and
remedies, each of which rights and remedies shall be independent of the other
and severally enforceable, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity:
A. SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
B. ACCOUNTING. The right and remedy to require Executive to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by Executive as the result of any transactions constituting a breach
of any of the Restrictive Covenants, and Executive shall account for and pay
over such Benefits to the Company.
C. The right to discontinue the payment of any amounts owing under
the Retention Agreement specifically including, without limitation, the Special
Termination Amount.
III. SEVERABILITY OF COVENANTS. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
IV. BLUE-PENCILLING. If any court construes any of the Restrictive
Covenants, or any
ii
<PAGE>
part thereof, to be unenforceable because of the duration of such provision or
the area covered thereby, such court shall have the power to reduce the duration
or area of such provision and, in its reduced form, such provision shall then be
enforceable and shall be enforced.
iii
<PAGE>
EXHIBIT 10.2
RETENTION AGREEMENT
This RETENTION AGREEMENT (the "Agreement") dated as of July 22,
1997, sets forth the mutual and binding understanding of the undersigned
regarding the special retention incentives intended to be afforded to
Michael F. Goss (the "Executive") by Playtex Products, Inc. (Playtex and its
subsidiaries together called the "Company") in order to assure that the Company
will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a "Change of Control".
1. Definitions:
The terms "Cause", "Change of Control" and "Good Reason" are defined in
Exhibit I.
2. Severance Upon Termination Prior To A Change Of Control:
A. Termination By The Company Without Cause:
If the Executive's employment is terminated by the Company during the Term
without "Cause" but prior to the occurrence of a Change of Control, the
Executive shall be entitled to receive an amount equal to two years'
salary (as in effect at the time of the termination) plus two years'
bonus (equal to the highest annual bonus paid or payable to the
Executive in respect of the three most recent fiscal years of the
Company ended prior to the date of the Executive's termination of
employment (the "Highest Annual Bonus")), both payable in cash within
30 days of the date of Termination.
Such severance payments shall be in lieu of any severance payments
otherwise payable under the Company Severance Plan or any other plan or
arrangement of the Company concerning the Executive's termination of
employment, but without prejudice to the Executive's other rights, if any,
to other compensation under the Company's other plans and arrangements.
<PAGE>
2
B. Termination By The Company For Cause, By The Executive Voluntarily,
Or By Reason Of Death Or Disability (As Defined In Company's Long
Term Disability Policy) Of Executive:
The Executive shall be entitled to the severance compensation set forth in
the Company's Severance Plan and any other arrangement to which the
Executive is party and which is applicable to such termination of
employment, if any, but shall not be entitled to any supplemental or
enhanced severance benefits hereunder.
3. Severance Upon Termination Following A Change Of Control:
For purposes of this Agreement, the Company's termination of the
Executive's employment without Cause within three months prior to the
occurrence of a Change of Control shall be treated as a termination within
three years following a Change of Control.
A. Termination Within Three Years Following a Change of Control (i) By
The Company Without Cause, Or (ii) By The Executive For "Good
Reason":
(i) The Company shall pay the Executive an amount (the "Special
Termination Amount") equal to the sum of (a) the Executive's annual base
salary at the time of the Change of Control or at the time of termination
(whichever is higher) and (b) the Highest Annual Bonus, payable within 30
days after the date of termination.
(ii) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the date of termination an amount equal to the sum of
(a) the Executive's annual base salary through the date of termination to
the extent not theretofore paid, (b) a pro rata portion of the Highest
Annual Bonus based upon the percentage of the Company's fiscal year that
shall have elapsed through the date of termination, (c) a pro rata
contribution to the Company's Profit-Sharing and Deferred Benefit
Equalization Plan with respect to the Executive (with no duplication of
benefits) for the current fiscal year, and (d) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid.
(iii) For the twenty-four month period following the date of
termination, the Company shall (a) continue medical, welfare and fringe
benefits to the Executive and/or the Executive's family at least equal to
those which would have been provided to them in accordance with the plans,
programs,
<PAGE>
3
practices and policies of the Company (as in at the time of the Change of
Control provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare and
fringe benefits under another employer provided plan, the medical and
other welfare and fringe benefits described herein shall be secondary to
those provided under such other plan during such applicable period of
eligibility, and (b) make equivalent payments to Executive equal to the
payments which would have been made under the Playtex Profit-Sharing Plan
and Deferred Benefits Equalization Plan with respect to the Executive,
payable when such payments are made under the respective Plans.
(iv) The Company will enter into the Consulting Agreement with
Executive set forth on Exhibit II, providing generally for the Executive
to render consulting services to the Company for a six month period
following termination of employment, with compensation equal to the sum of
(a) the Executive's annual salary at the time of the Change of Control or
at the time of termination (whichever is higher) plus (b) the Highest
Annual Bonus.
The severance payments and benefits provided hereunder shall be in lieu of
any severance payments otherwise payable under the Company's Severance
Plan or any other plan or arrangement of the Company in respect of the
Executive's termination of employment, but without prejudice to the
Executive's other rights, if any, to other compensation under the
Company's other plans and arrangements.
B. Termination (i) By The Company For Cause, (ii) By The Executive
Without Good Reason, (iii) Death Or Disability, Or (iv) For Any
Reason After The Third Anniversary Of A Change Of Control:
Executive shall be entitled to the severance compensation set forth in the
Company's Severance Plan or any other plan or arrangement to which the
Executive is a party and which is applicable to such termination of
employment, if any, but shall not be entitled to any supplemental or
enhanced severance benefits hereunder.
<PAGE>
4
4. Special Payments Upon The Occurrence Of A Change of Control:
The Company shall pay the Executive a special bonus (the "Special Bonus")
in cash equal to the Highest Annual Bonus within 30 days following the
consummation of the Change of Control.
The Executive's accounts under the Playtex Products Profit-Sharing
Retirement Plan and Deferred Benefit Equalization Plan shall become
fully vested as of immediately prior to the consummation of the Change
of Control.
The Executive's outstanding stock options granted under the 1994 Playtex
Stock Option Plan shall become fully vested as of immediately prior to the
consummation of the Change of Control, provided, however, that such stock
options shall not vest on an accelerated basis if such acceleration is the
only factor which would prevent use of the pooling method of accounting in
connection with the Change in Control in which event, the unvested options
must be exchanged for common stock of the acquiror of equal value.
5. Certain Restrictions On Payment Of Compensation And Benefits:
Notwithstanding any other provision of this Agreement to the contrary, if
the Company or the Executive determines (on the basis of advice from the
Company's independent public accountants) that part or all of the
consideration, compensation or benefits to be paid to Executive under this
Agreement or any other arrangement, plan or policy constitutes a
"parachute payment" under section 280G(b)(2) of the Internal Revenue Code
of 1986, as amended ("Code"), then the amounts constituting a "parachute
payment" which would otherwise be payable to or for the benefit of
Executive shall be reduced to the extent necessary so that the reduced
payments do not constitute a "parachute payment". If, due to the
uncertainty in the application of Section 4999, payments are made to the
Executive which should not have been paid, such amount shall be treated as
a loan to the Executive, who shall repay it with interest at the
applicable federal rate provided for in section 7872(f)(2) of the Code;
and if additional amounts could have been paid to the Executive, the
Company shall pay such amount together with such interest provided for in
section 7872(f)(2) of the Code.
6. No Mitigation Or Setoffs:
The Executive shall not be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive
under this
<PAGE>
5
Agreement and, except as provided in Section 3(A)(iii)(a) (relating to
continuation of medical, welfare and fringe benefits), such amounts shall
not be reduced or subject to setoffs (whether or not the Executive obtains
other employment).
7. Confidential Information:
During the term of Executive's employment by the Company, Executive shall
keep secret and retain in strictest confidence, and shall not use for the
benefit of himself or others except in connection with the business and
affairs of the Company, all confidential matters of the Company and its
affiliates, including, without limitation, trade "know-how", secrets,
consultant contracts, customer lists, subscription lists, details of
consultant contracts, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans, business
acquisition plans, new personnel acquisition plans, methods of
manufacture, technical processes, designs and design projects, inventions
and research projects and other business affairs of the Company and its
affiliates learned by Executive heretofore or hereafter, and shall not
disclose them to anyone outside of the Company and its affiliates, either
during or after employment by the Company or any of its affiliates, except
(i) as required in the course of performing duties hereunder, (ii) with
the Company's express written consent, (iii) if such information is or
becomes generally known by the public other than as a result of a breach
hereof or (iv) as required by law or judicial or administrative process.
8. Miscellaneous:
A. Withholding:
The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
B. Governing Law/Amendment:
This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut, without reference to the principles of
conflict of laws. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
<PAGE>
6
C. Enforceability:
The Company agrees to pay all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of the
outcome) by the Company or the Executive or others of the enforceability
of any provision of this Agreement, including the amount of any payment,
plus interest on any delayed payment.
D. Waiver:
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision.
The Executive's or the Company's failure to insist upon strict compliance
with any provision or the failure to assert any right shall not be deemed
to be a waiver of such provision or right.
E. Counterparts; Binding Effect:
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which taken together shall constitute
one and the same agreement. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael R. Gallagher
--------------------------
Name: Michael R. Gallagher
Title: Chief Executive
Officer
/s/ Michael F. Goss
-----------------------------
Michael F. Goss
<PAGE>
EXHIBIT I
CERTAIN DEFINED TERMS
"CAUSE" shall mean (i) repeated violations by the Executive of the
Executive's duties to the Company (other than as a result of incapacity due to
physical or mental illness) which are demonstrably willful and deliberate on the
Executive's part, which are committed in bad faith or without reasonable belief
that such violations are in the best interests of the Company and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company specifying such violations and (ii) the Executive's conviction of a
felony involving the assets or business of the Company or its affiliates.
"CHANGE OF CONTROL" shall mean the occurrence of any of the
following:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14
(d) of the Exchange Act), is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have beneficial ownership of all shares that such Person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the voting stock
of the Company, (ii) the sale, lease, transfer, conveyance or other disposition,
in one or a series of related transactions, of all or substantially all of the
assets of the Company to any "person" or "group" (as such terms are used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than to any party or
parties to the Stock Purchase Agreement or their respective affiliates or (iii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Company (the "Board")
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of all the Directors or a majority of the Directors on either
the "Purchaser Nominating Committee" or the "Non-Purchaser Nominating Committee"
as such terms are defined by the Stock Purchase Agreement, in each case who were
either directors at the beginning of such period or were previously so elected
or nominated) cease for any reason to constitute a majority of the Board then in
office.
"GOOD REASON" shall mean any substantial diminution in the
Executive's title, duties, status, reporting relationship, authority, or
responsibilities, a reduction in the aggregate compensation and benefits
provided to the Executive by the Company and its affiliates from those earned by
the Executive at the time of the Change of Control, or a requirement that the
Executive's principal place of employment be relocated more than 35 miles from
his principal place of employment prior to the occurrence of a Change of
Control, which diminution, reduction or relocation is not remedied in a
reasonable period of time after receipt of written notice from the Executive
specifying such events.
<PAGE>
EXHIBIT II
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of the _____ day of _______, _____, by and
between Playtex Products, Inc., a Delaware corporation (the "Company"), and
Michael F. Goss ("Consultant").
WITNESSETH:
WHEREAS, Consultant was the Executive Vice President and Chief Financial
Officer of the Company, is familiar with the Company's markets, operations,
finances and business, his services to the Company are of a special and unique
character, and it is of importance to the Company to retain the services of
Consultant for a period of time;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto covenant and
agree as follows:
1. EFFECTIVE DATE. This Agreement shall become effective the day the
Consultant's present employment by the Company is ended in accordance with
Section 3(A) of the Retention Agreement dated July 22, 1997 with the Company.
2. CONSULTING SERVICES.
(i) The Company hereby agrees to engage Consultant and Consultant hereby
agrees to accept the engagement with the Company, to provide consulting services
to the Company, as an independent contractor, as Company shall reasonably
request, which services shall include general financial and business advice,
assistance with Company-related litigation, meeting and consulting with the
Board of Directors, and similar advisory services at such times and places as
Consultant is reasonably notified by Company for a period (the "Consulting
Period") beginning upon the Effective Date and ending six months thereafter.
(ii) Consultant shall be paid $_________ for his consulting services
("Consulting Fee"), payable in six monthly installments during the Consulting
Period. Consultant shall be reimbursed for ordinary and necessary business
expenses incurred in connection with the performance of such services and which
are authorized by the Company. Consultant shall not be required to travel in
performing services hereunder.
(iii) It is understood that such consulting services shall be incidental
to, and shall not interfere with, the other business activities and commitments
of Consultant. The full Consulting Fee shall be paid to Consultant regardless
of the amount and frequency of consulting services actually requested of him.
3. CONFIDENTIAL INFORMATION. During the Consulting Period and for a
period of two years after the termination of the Consulting Period, Consultant
shall not disclose or make accessible to anyone, or make use of any confidential
information which he shall have obtained from the Company while employed by the
Company or during the period of the Consulting Agreement, with respect to
confidential or secret processes, formulae, inventions, machinery, plans,
customers, trade secrets, business procedures and methods, devices or matters of
any kind relating to or with respect to any confidential research, engineering
or developmental work, programs or projects of the Company. Upon termination of
the Consulting Period, Consultant shall, at the request of Company,
<PAGE>
promptly deliver to the Company all documents in whatever form (including all
copies thereof) containing confidential information of the Company that
Consultant then possesses or has under his control.
4. INJUNCTIVE RELIEF. In the event of breach by Consultant of Section
3, the Company shall be entitled to institute legal proceedings to obtain
damages for any such breach, to enforce the specific performance of such terms
by Consultant and to enjoin Consultant from any further violation of such terms,
and to exercise such remedies cumulatively or in conjunction with all other
rights and remedies provided by law. Consultant acknowledges, however, that the
remedies at law for any breach may be inadequate and that the Company shall be
entitled to injunctive relief in the event of any such breach.
5. TAXES. It is intended that the fees paid hereunder shall constitute
revenues to Consultant. To the extent consistent with applicable law, the
Company will not withhold any amounts therefrom as federal income tax
withholding from wages or as employee contributions under the Federal Insurance
Contributions Act or any other state or federal laws. Consultant shall be
solely responsible for the withholding and/or payment of any federal, state or
local income or payroll taxes and shall hold the Company, its officers,
directors and employees harmless from any liability arising from the failure to
withhold such amounts.
6. MODIFICATION; WAIVER; DISCHARGE. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by each of the parties hereto. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
7. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the Company.
8. STRICT PERFORMANCE. Either party's failure to demand strict
performance and compliance with any part of this Agreement during the term of
this Agreement shall not be deemed to be a waiver of any of such party's rights
under this Agreement or by operation of law.
9. ASSIGNMENT. This Agreement and all rights hereunder are personal to
the Consultant and may not, unless otherwise specifically permitted herein, be
assigned by him. The Company may assign this Agreement to and all rights
hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
whether by purchase, merger or consolidation.
10. COMPLETE AGREEMENT. Except for the Retention Agreement, the Company
and Consultant acknowledge that this Agreement is the only agreement by and
among the parties with respect to the subject matter contained herein and that
there are no oral or implied agreements or other modifications not specifically
set forth herein or therein.
11. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Connecticut without regard to its conflicts of law principles.
<PAGE>
IN WITNESS WHEREOF, the Company and Consultant have each executed and delivered
this Agreement the day and year first above written.
PLAYTEX PRODUCTS, INC.
By:______________________
-----------------------------------
Michael F. Goss
<PAGE>
EXHIBIT 10.3
FORM OF RETENTION AGREEMENT
This RETENTION AGREEMENT (the "Agreement") dated as of July 22,
1997, sets forth the mutual and binding understanding of the undersigned
regarding the special retention incentives intended to be afforded to
____________ (the "Executive") by Playtex Products, Inc. (Playtex and its
subsidiaries together called the "Company") in order to assure that the Company
will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a "Change of Control".
1. Definitions:
The terms "Cause", "Change of Control" and "Good Reason" are defined in
Exhibit I.
2. Severance Upon Termination Prior To A Change Of Control:
A. Termination By The Company Without Cause:
If the Executive's employment is terminated by the Company during the Term
without "Cause" but prior to the occurrence of a Change of Control, the
Executive shall be entitled to receive an amount equal to one year's
salary in effect at the time of the termination, plus one year's bonus
(equal to the highest annual bonus paid or payable to the Executive in
respect of the three most recent fiscal years ended prior to the date of
the Executive's termination of employment (the "Highest Annual Bonus"),
both payable in cash within 30 days of the date of Termination.
Such severance payments shall be in lieu of any severance payments
otherwise payable under the Company Severance Plan or any other plan or
arrangement of the Company concerning the Executive's termination of
employment, but without prejudice to the Executive's other rights, if any,
to other compensation under the Company's other plans and arrangements.
B. Termination By The Company For Cause, By The Executive Voluntarily,
or By Reason Of Death Or Disability (As Defined In Company's Long
Term Disability Policy) Of Executive or:
The Executive shall be entitled to the severance compensation set forth in
the Company's Severance Plan and any other arrangement to which the
Executive is party and which is applicable to such termination of
employment, if any, but
<PAGE>
2
shall not be entitled to any supplemental or enhanced severance benefits
hereunder.
3. Severance Upon Termination Following A Change Of Control:
For purposes of this Agreement, the Company's termination of the
Executive's employment without Cause within three months prior to the
occurrence of a Change of Control shall be treated as a termination
following a Change of Control.
A. Termination Within Three Years Following a Change of Control (i) By
The Company Without Cause, Or (ii) By The Executive For "Good
Reason":
(i) The Company shall pay the Executive an amount (the "Special
Termination Amount") equal to (a) one times the Executive's annual base
salary at the time of the Change of Control or at the time of termination
(whichever is higher) plus (b) one times the Highest Annual Bonus, payable
within 30 days after the date of termination.
(ii) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the date of termination an amount equal to the sum of
(a) the Executive's annual base salary through the date of termination to
the extent not theretofore paid, (b) a pro rata portion of the Highest
Annual Bonus based upon the percentage of the Company's fiscal year that
shall have elapsed through the date of termination, (c) a pro rata
contribution to the Company's Profit-Sharing and Deferred Benefit
Equalization Plan with respect to the Executive (with no duplication of
benefits) for the current fiscal year, and (d) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid.
(iii) For the one-year period following the date of termination, the
Company shall (a) continue medical, welfare and fringe benefits to the
Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies of the Company (as in at the time of the Change of
Control; provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare and
fringe benefits under another employer provided plan, the medical and
other welfare and fringe benefits under another employer provided plan,
the medical and other welfare and fringe benefits described herein shall
be secondary to those provided under such other plan during such
applicable period of eligibility, and (b) make equivalent payments to
Executive equal to the payments which would have been made under the
Playtex Profit-Sharing Plan and Deferred Benefits Equalization Plan
<PAGE>
3
with respect to the Executive, payable when such payments are made under
the respective Plans.
The severance payments and benefits provided hereunder shall be in lieu of
any severance payments otherwise payable under the Company's Severance
Plan or any other plan or arrangement of the Company in respect of the
Executive's termination of employment, but without prejudice to the
Executive's other rights, if any, to other compensation under the
Company's other plans and arrangements.
B. Termination (i) By The Company For Cause, (ii) By The Executive
Without Good Reason, (iii) Death or Disability, Or (iv) For Any
Reason After The Third Anniversary Of A Change Of Control:
Executive shall be entitled to the severance compensation set forth in the
Company's Severance Plan or any other plan or arrangement to which the
Executive is a party and which is applicable to such termination of
employment, if any, but shall not be entitled to any supplemental or
enhanced severance benefits hereunder.
4. Special Payments Upon The Occurrence Of A Change of Control:
The Company shall pay the Executive a special bonus (the "Special Bonus")
in cash equal to the Highest Annual Bonus within 30 days following the
consummation of the Change of Control.
The Executive's accounts under the Playtex Products Profit-Sharing
Retirement Plan and Deferred Benefit Equalization Plan shall become fully
vested as of immediately prior to the consummation of the Change of
Control.
The Executive's accounts under the Playtex Products Profit-Sharing
Retirement Plan and Deferred Benefit Equalization Plan shall become fully
vested as of immediately prior to the consummation of the Change of
Control.
The Executive's outstanding stock options granted under the 1994 Playtex
Stock Option Plan shall become fully vested as of immediately prior to the
consummation of the Change of Control, provided, however, that such stock
options shall not vest on an accelerated basis if such acceleration is the
only factor which would prevent use of the pooling method of accounting in
connection with the Change in Control in which event, the unvested options
must be exchanged for common stock of the acquiror of equal value.
5. Certain Restrictions On Payment Of Compensation And Benefits:
<PAGE>
4
Notwithstanding any other provision of this Agreement to the contrary, if
the Company or the Executive determines (on the basis of advice from the
Company's independent public accountants) that part or all of the
consideration, compensation or benefits to be paid to Executive under this
Agreement or any other arrangement, plan or policy constitutes a
"parachute payment" under section 280G(b)(2) of the Internal Revenue Code
of 1986, as amended ("Code"), then the amounts constituting a "parachute
payment" which would otherwise be payable to or for the benefit of
Executive shall be reduced to the extent necessary so that the reduced
payments do not constitute a "parachute payment". If, due to the
uncertainty in the application of Section 4999, payments are made to the
Executive which should not have been paid, such amount shall be treated as
a loan to the Executive, who shall repay it with interest at the
applicable federal rate provided for in section 7872(f)(2) of the Code;
and if additional amounts could have been paid to the Executive, the
Company shall pay such amount together with such interest provided for in
section 7872(f)(2) of the Code.
6. No Mitigation Or Setoffs:
The Executive shall not be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive
under this Agreement and, except as provided in Section 3(A)(iii)(a)
(relating to continuation of medical, welfare and fringe benefits), such
amounts shall not be reduced or subject to setoffs (whether or not the
Executive obtains other employment).
7. Confidential Information:
During the term of Executive's employment by the Company, Executive shall
keep secret and retain in strictest confidence, and shall not use for the
benefit of himself or others except in connection with the business and
affairs of the Company, all confidential matters of the Company and its
affiliates, including, without limitation, trade "know-how", secrets,
consultant contracts, customer lists, subscription lists, details of
consultant contracts, pricing policies, operations methods, marketing
plans or strategies, product development techniques or plans, business
acquisition plans, new personnel acquisition plans, methods of
manufacture, technical processes, designs and design projects, inventions
and research projects and other business affairs of the Company and its
affiliates learned by Executive heretofore or hereafter, and shall not
disclose them to anyone outside of the Company and its affiliates, either
during or after employment by the Company or any of its affiliates, except
(i) as required in the
<PAGE>
5
course of performing duties hereunder, (ii) with the Company's express
written consent, (iii) if such information is or becomes generally known
by the public other than as a result of a breach hereof or (iv) as
required by law or judicial or administrative process.
8. Miscellaneous:
A. Withholding:
The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
B. Governing Law/Amendment:
This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut, without reference to the principles of
conflict of laws. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
C. Enforceability:
The Company agrees to pay all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of the
outcome) by the Company or the Executive or others of the enforceability
of any provision of this Agreement, including the amount of any payment,
plus interest on any delayed payment.
D. Waiver:
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision.
The Executive's or the Company's failure to insist upon strict compliance
with any provision or the failure to assert any right shall not be deemed
to be a waiver of such provision or right.
E. Counterparts; Binding Effect:
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which taken together shall constitute
one and the same
<PAGE>
6
agreement. This Agreement shall be binding upon and inure to the benefit
of the successors and assigns of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
PLAYTEX PRODUCTS, INC.
___________________________ By:________________________
[Executive] Name:
Title:
<PAGE>
EXHIBIT I
CERTAIN DEFINED TERMS
"CAUSE" shall mean (i) repeated violations by the Executive of the
Executive's duties to the Company (other than as a result of incapacity due to
physical or mental illness) which are demonstrably willful and deliberate on the
Executive's part, which are committed in bad faith or without reasonable belief
that such violations are in the best interests of the Company and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company specifying such violations and (ii) the Executive's conviction of a
felony involving the assets or business of the Company or its affiliates.
"CHANGE OF CONTROL" shall mean the occurrence of any of the
following:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14
(d) of the Exchange Act), is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have beneficial ownership of all shares that such Person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the voting stock
of the Company, (ii) the sale, lease, transfer, conveyance or other disposition,
in one or a series of related transactions, of all or substantially all of the
assets of the Company to any "person" or "group" (as such terms are used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than to any party or
parties to the Stock Purchase Agreement or their respective affiliates or (iii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Company (the "Board")
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of all the Directors or a majority of the Directors on either
the "Purchaser Nominating Committee" or the "Non-Purchaser Nominating Committee"
as such terms are defined by the Stock Purchase Agreement, in each case who were
either directors at the beginning of such period or were previously so elected
or nominated) cease for any reason to constitute a majority of the Board then in
office.
"GOOD REASON" shall mean any substantial diminution in the
Executive's title, duties, status, reporting relationship, authority, or
responsibilities, a reduction in the aggregate compensation and benefits
provided to the Executive by the Company and its affiliates from those earned by
the Executive at the time of the Change of Control, or a requirement that the
Executive's principal place of employment be relocated more than 35 miles from
his principal place of employment prior to the occurrence of a Change of
Control, which diminution, reduction or relocation is not remedied in a
reasonable period of time after receipt of written notice from the Executive
specifying such events.
<PAGE>
LETTER OF TRANSMITTAL
PLAYTEX PRODUCTS, INC.
OFFER TO EXCHANGE
8 7/8% SENIOR NOTES DUE 2004, SERIES B,
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OUTSTANDING
8 7/8% SENIOR NOTES DUE 2004, SERIES A,
PURSUANT TO THE PROSPECTUS, DATED AUGUST [ ], 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:OO P.M. NEW YORK CITY TIME, ON [ ],
[ ], UNLESS EXTENDED (THE "EXPIRATION DATE"), TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
DELIVERY TO: Marine Midland Bank, EXCHANGE AGENT
BY MAIL, OVERNIGHT COURIER OR HAND:
Marine Midland Bank
140 Broadway, Level A
New York, New York 10005-1180
Attention: Corporate Trust Operations
BY FACSIMILE IN NEW YORK:
(212) 658-2292
CONFIRM BY TELEPHONE:
(212) 658-5931
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated August [ ], 1997 (the "Prospectus"), of Playtex Products,
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal
(the "Letter"), which together constitute the Company's offer (the "Exchange
Offer") to exchange an aggregate principal amount of up to $150,000,000 of its
8 7/8% Senior Notes Due 2004, Series B, which have been registered under the
Securities Act of 1933, as amended (the "New Senior Notes"), for a like
principal amount of the issued and outstanding 8 7/8% Senior Notes Due 2004,
Series A (the "Old Senior Notes"), of the Company from the holders thereof.
For each Old Senior Note accepted for exchange, the holder of such Old
Senior Note will receive a New Senior Note having a principal amount equal to
that of the surrendered Old Senior Note. The New Senior Notes will bear interest
from the most recent date to which interest has been paid on the Old Senior
Notes or, if no interest has been paid on the Old Senior Notes, from July 21,
1997. Accordingly, if the relevant record date for interest payment occurs after
the consummation of the Exchange Offer registered holders of New Senior Notes on
such record date will receive interest accruing from the most recent date to
which interest has been paid or, if no interest has been paid, from July 21,
1997. If, however, the relevant record date for interest payment occurs prior to
the consummation of the Exchange Offer registered holders of Old Senior Notes on
such record date will receive interest accruing from the most recent date to
which interest has been paid or, if no interest has been paid, from July 21,
1997. Old Senior Notes accepted for exchange will cease to accrue interest from
and after the date of consummation of the Exchange Offer, except as set forth in
the immediately preceding sentence. Holders of Old Senior Notes whose Old Senior
Notes are accepted for exchange will not receive any payment in respect of
interest on such Old Senior Notes otherwise payable on any interest payment date
the record date for which occurs on or after consummation of the Exchange Offer.
This Letter is to be completed by a holder of Old Senior Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Senior Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Procedures for Tendering Initial Notes" section of the
Prospectus and an Agent's Message (as defined herein) is not
<PAGE>
delivered. Holders of Old Senior Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Old Senior Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and
all other documents required by this Letter to the Exchange Agent on or prior to
the Expiration Date, must tender their Old Senior Notes according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for
Tendering Initial Notes" section of the Prospectus. See Instruction 1. Delivery
of documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Senior Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Senior Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DESCRIPTION OF OLD SENIOR NOTES 1 2 3
<CAPTION>
AGGREGATE
PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED AMOUNT OF PRINCIPAL
HOLDER(S) CERTIFICATE OLD SENIOR AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* NOTE(S) TENDERED**
<S> <C> <C> <C>
Total
* Need not be completed if Old Senior Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of
the Old Senior Notes represented by the Old Senior Notes indicated in column 2. See
Instruction 2. Old Senior Notes tendered hereby must be in denominations of principal amount
of $1,000 and any integral multiple thereof. See Instruction 1.
</TABLE>
/ / CHECK HERE IF TENDERED OLD SENIOR NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
<TABLE>
<S> <C>
Name of Tendering Institution
</TABLE>
<TABLE>
<S> <C> <C> <C>
Account Number ----------------------- Transaction Code Number -----------------------
</TABLE>
By crediting Old Senior Notes to the Exchange Agent's Account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's Automated Tender Offer Program ("ATOP") and by complying with
applicable ATOP procedures with respect to the Exchange Offer, including
transmitting an Agent's Message to the Exchange Agent in which the Holder of Old
Senior Notes acknowledges and agrees to be bound by the terms of this Letter,
the participant in ATOP confirms on behalf of itself and the beneficial owners
of such Old Senior Notes all provisions of this Letter applicable to it and such
beneficial owners as if it had completed the information required herein and
executed and transmitted this Letter to the Exchange Agent.
<PAGE>
/ / CHECK HERE IF TENDERED OLD SENIOR NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
<TABLE>
<S> <C>
Name(s) of Registered Holder(s)
--------------------------------------------
Widow Ticket Number (if any)
--------------------------------------------
Date of Execution of Notice of Guaranteed
Delivery
--------------------------------------------
Name of Institution which guaranteed delivery
--------------------------------------------
</TABLE>
If Delivered by Book-Entry Transfer, Complete the Following:
<TABLE>
<S> <C> <C> <C>
Account Number ----------------------- Transaction Code Number -----------------------
</TABLE>
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
<TABLE>
<S> <C>
Name: --------------------------------------------------------------------------------
Address: --------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of the
New Senior Notes. If the undersigned is a broker-dealer that will receive New
Senior Notes for its own account in exchange for Old Senior Notes, it represents
that the Old Senior Notes to be exchanged for New Senior Notes were acquired by
it as a result of market-making or other trading activities and acknowledges
that it will deliver a prospectus meeting the requirements of the Securities Act
of 1933, as amended, in connection with any resale of such New Senior Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act of 1933, as amended.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Senior Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Senior Notes tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Senior Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Senior Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Senior Notes acquired in
exchange for Old Senior Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such New Senior Notes,
whether or not such person is the undersigned, that neither the holder of such
Old Senior Notes nor any such other person has an arrangement or understanding
with any person to participate in the distribution of such New Senior Notes and
that neither the holder of such Old Senior Notes nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended
(the "Securities Act"), of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Senior Notes issued in exchange for the Old Senior Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Senior Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement with any person to participate in the distribution of such New
Senior Notes. However, the Company does not intend to request the SEC to
consider, and the SEC has not considered the Exchange Offer in the context of a
no-action letter and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the Exchange Offer as in other
circumstances. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Senior Notes and has no arrangement or understanding to
participate in a distribution of New Senior Notes. If any holder is an affiliate
of the Company, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the New Senior Notes to be
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the
applicable interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. If the undersigned is a broker-dealer
that will receive New Senior Notes for its own account in exchange for Old
Senior Notes, it represents that the Old Senior Notes to be exchanged for the
New Senior Notes were acquired by it as a result of market-making or other
trading activities and acknowledges that it will deliver a prospectus in
connection with any resale of such New Senior Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Senior Notes tendered hereby. All
authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer -- Withdrawal Rights" section of the Prospectus.
<PAGE>
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Senior Notes (and, if applicable,
substitute certificates representing Old Senior Notes for any Old Senior Notes
not exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Old Senior Notes, please credit the account indicated above
maintained at the Book Entry Transfer Facility. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions" below, please
send the New Senior Notes (and, if applicable, substitute certificates
representing Old Senior Notes for any Old Senior Notes not exchanged) to the
undersigned at the address shown above in the box entitled "Description of Old
Senior Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD SENIOR
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
SENIOR NOTES AS SET FORTH IN SUCH BOX ABOVE.
<PAGE>
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old To be completed ONLY if certificates for Old
Senior Notes not exchanged and/or New Senior Senior Notes not exchanged and/or New Senior
Notes are to be issued in the name of and Notes are to be sent to someone other than
sent to someone other than the person or the person or persons whose signature(s)
persons whose signature(s) appear(s) on this appear(s) on this Letter above or to such
Letter above, or if Old Senior Notes person or persons at an address other than
delivered by book-entry transfer which are shown in the box entitled "Description of
not accepted for exchange are to be returned Old Senior Notes" on this Letter above.
by credit to an account maintained at the
Book-Entry Transfer Facility other than the
account indicated above.
Issue: New Senior Notes and/or Old Senior Mail: New Senior Notes and/or Old Senior
Notes to: Notes to:
Name(s) Name(s)
- ------------------------------------------- -------------------------------------------
(Please Type or Print) (Please Type or Print)
- -------------------------------------------- --------------------------------------------
(Please Type or Print) (Please Type or Print)
Address Address
- ------------------------------------------- -------------------------------------------
- ------------------------------------------- -------------------------------------------
(Zip Code) (Zip Code)
(Complete Substitute Form W-9)
/ / Credit unexchanged Old Senior Notes
delivered by book-entry transfer to the
Book-Entry Transfer Facility account set
forth below.
- -------------------------------------------
(Book-Entry Transfer Facility)
Account Number, if applicable
</TABLE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD SENIOR NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
<TABLE>
<S> <C> <C> <C>
x --------------------------------- -------------------------------------------------- , 1997
x --------------------------------- -------------------------------------------------- , 1997
SIGNATURE(S) OF OWNER DATE
</TABLE>
<TABLE>
<S> <C>
Area Code and Telephone Number ------------------------------------------------
</TABLE>
If a holder is tendering any Old Senior Notes, this Letter must be signed by
the registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Old Senior Notes or by any person(s) authorized to become registered holder(s)
by endorsements and documents transmitted herewith. If signature is by a
trustee, executor, administrator, guardian, officer or other person acting in a
fiduciary ir representative capacity, please set forth full title. See
Instruction 3.
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
<TABLE>
<S> <C>
Signature(s) Guaranteed by
an Eligible Institution: ------------------------------------------------------------------
</TABLE>
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(TITLE)
- --------------------------------------------------------------------------------
(NAME AND FIRM)
<TABLE>
<S> <C> <C>
Dated: ------------------------------------------------------------------------------ , 1997
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER TO EXCHANGE
8 7/8% SENIOR NOTES DUE 2004, SERIES B WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL OUTSTANDING
8 7/8% SENIOR NOTES DUE 2004, SERIES A OF PLAYTEX PRODUCTS, INC.
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This letter is to be completed by noteholders either if certificates are to
be forwarded herewith or if tenders are to be made pursuant to the procedures
for delivery by book-entry transfer set forth in "The Exchange Offer--Procedures
for Tendering Initial Notes" section of the Prospectus and an Agent's Message is
not delivered. Certificates for all physically tendered Old Senior Notes, or
Book-Entry Confirmation, as the case may be, as well as a properly completed and
duly executed Letter (or manually signed facsimile hereof) and any other
documents required by this Letter, must be received by the Exchange Agent at the
address set forth herein on or prior to the Expiration Date, or the tendering
holder must comply with the guaranteed delivery procedures set forth below. Old
Senior Notes tendered hereby must be in denominations of principal amount of
$1,000 and any integral multiple thereof. The term "Agent's Message" means a
message, transmitted to the Book-Entry Transfer Facility and received by the
Exchange Agent and forming a part of the Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the tendering Participant that such Participant has received and agrees to
be bound by this Letter and that the Company may enforce this Letter against
such Participant.
Noteholders whose certificates for Old Senior Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Senior Notes pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer--Procedures for Tendering Initial Notes" section of
the Prospectus. Pursuant to such procedures, (i) such tender must be made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent must receive from such Eligible Institution a properly completed and duly
executed Letter (or a facsimile thereof or an Agent's Message in lieu hereof)
and Notice of Guaranteed Delivery, substantially in the form provided by the
Company (by telegram, telex, facsimile transmission, mail or hand delivery),
setting forth the name and address of the holder of Old Senior Notes and the
amount of Old Senior Notes tendered, stating that the tender is being made
thereby and guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Senior Notes, or a Book-Entry
Confirmation, and any other documents required by the Letter will be deposited
by the Eligible Institution with the Exchange Agent, and (iii) the certificates
for all physically tendered Old Senior Notes, in proper form for transfer, or
Book-Entry Confirmation, as the case may be, and all other documents required by
this Letter, are received by the Exchange Agent within three NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Senior Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Old Senior Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Old Senior Notes evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount of Old Senior Notes to be tendered in the box above
entitled "Description of Old Senior Notes--Principal Amount Tendered." A
reissued certificate
<PAGE>
representing the balance of nontendered Old Senior Notes will be sent to such
tendering holder, unless otherwise provided in the appropriate box on this
Letter, promptly after the Expiration Date. All of the Old Senior Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
3. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Senior Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Senior Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Old Senior Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the Old
Senior Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the New Senior
Notes are to be issued, or any untendered Old Senior Notes are to be reissued,
to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required. Signatures
on such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Old Senior Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (an "Eligible
Institution").
Signatures on this Letter need not be guaranteed by an Eligible Institution,
provided the Old Senior Notes are tendered: (i) by a registered holder of Old
Senior Notes (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holders of such Old Senior Notes) who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter, or (ii) for the account of an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Senior Notes should indicate in the applicable box
the name and address to which New Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Old Senior Notes not exchanged are to
be issued or sent, if different from the name or address of the person signing
this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Holders tendering Old Senior Notes by book-entry transfer may request
that Old Senior Notes not exchanged be credited to such account maintained at
the Book-Entry Transfer Facility as such noteholder may designate hereon. If no
such instructions are given, such Old Senior Notes not exchanged will be
returned to the name or address of the person signing this Letter.
<PAGE>
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Senior Notes are accepted for exchange must provide the Company (as payor) with
such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9 below, which in the case of a tendering holder who is an individual, is his
or her social security number. If the Company is not provided with the current
TIN or an adequate basis for an exemption, such tendering holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery
to such tendering holder of New Senior Notes may be subject to backup
withholding in an amount equal to 31% of all reportable payments made after the
exchange. If withholding results in an overpayment of taxes, a refund may be
obtained.
Exempt holders of Old Senior Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed Guidelines of
Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9
Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Old Senior Notes
must provide its correct TIN by completing the Substitute Form W-9 set forth
below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding, or
(ii) the holder has not been notified by the Internal Revenue Service that such
holder is subject to backup withholding as a result of a failure to report all
interest or dividends or (iii) the Internal Revenue Service has notified the
holder that such holder is no longer subject to backup withholding. If the
tendering holder of Old Senior Notes is a nonresident alien or foreign entity
not subject to backup withholding, such holder must give the Company a completed
Form W-8, Certificate of Foreign Status. These forms may be obtained from the
Exchange Agent. If the Old Senior Notes are in more than one name or are not in
the name of the actual owner, such holder should consult the W-9 Guidelines for
information on which TIN to report. If such holder does not have a TIN, such
holder should consult the W-9 Guidelines for instructions on applying for a TIN,
check the box in Part 2 of the Substitute Form W-9 and write "applied for" in
lieu of its TIN. Note: Checking this box and writing "applied for" on the form
means that such holder has already applied for a TIN or that such holder intends
to apply for one in the near future. If such holder does not provide its TIN to
the Company within 60 days, backup withholding will begin and continue until
such holder furnishes its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Senior Notes to it or its order pursuant to the Exchange Offer. If,
however, New Senior Notes and/or substitute Old Senior Notes not exchanged are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Senior Notes tendered hereby, or if
tendered Old Senior Notes are registered in the name of any person other than
the person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer of Old Senior Notes to the Company or its order pursuant
to the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted herewith, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Senior Notes specified in this
Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
<PAGE>
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Senior Notes, by execution of this
Letter, shall waive any right to receive notice of the acceptance of their Old
Senior Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Senior Notes nor shall any of them incur any liability for failure to give any
such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD SENIOR NOTES.
Any holder whose Old Senior Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
11. INCORPORATION OF LETTER OF TRANSMITTAL.
This Letter shall be deemed to be incorporated in and acknowledged and
accepted by any tender through the Book-Entry Transfer Facility's ATOP
procedures by any Participant on behalf of itself and the beneficial owners of
any Old Senior Notes so tendered.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: MARINE MIDLAND BANK
<TABLE>
<S> <C> <C>
SUBSTITUTE PART 1-PLEASE PROVIDE YOUR TIN: ------------------------
FORM W-9 TIN IN THE BOX AT RIGHT AND Social Security Number or
DEPARTMENT OF TREASURY CERTIFY BY SIGNING AND Employer Identification Number
INTERNAL REVENUE SERVICE DATING BELOW.
PART 2-TIN Applied For / /
PAYOR'S REQUEST FOR CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
TAXPAYER IDENTIFICATION
NUMBER ("TIN") AND (1) the number shown on this form is my correct Taxpayer
CERTIFICATION Identification Number (or I am waiting for a number to be
issued to me).
(2) I am not subject to backup withholding either because: (a) I
am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (the "IRS") that I
am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding, and
(3) any other information provided on this form is true and
correct.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
SIGNATURE ------------------------------------ DATE -----------------------
</TABLE>
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
<TABLE>
<S> <C>
- --------------------------------------------------------------- ---------------------------
Signature Date
</TABLE>
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
PLAYTEX PRODUCTS, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Playtex Products, Inc. (the "Company") made pursuant to the
Prospectus dated August [ ], 1997 (the "Prospectus"), if certificates for the
outstanding 8 7/8% Senior Notes Due 2004, Series A of the Company (the "Old
Senior Notes") are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Company prior to 5:00 p.m., New York City time,
on the Expiration Date of the Exchange Offer. Such form may be delivered or
transmitted by telegram, telex, facsimile transmission, mail or hand delivery to
Marine Midland Bank (the "Exchange Agent") as set forth below. In addition, in
order to utilize the guaranteed delivery procedure to tender Old Senior Notes
pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal (or facsimile thereof) must also be received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized
terms not defined herein are defined in the Prospectus.
DELIVERY TO:
MARINE MIDLAND BANK,
EXCHANGE AGENT
<TABLE>
<S> <C>
BY MAIL, OVERNIGHT COURIER OR HAND: BY FACSIMILE:
Marine Midland Bank (212) 658-2292
140 Broadway, Level A
New York, New York 10005-1180 CONFIRM BY TELEPHONE:
Attn: Corporate Trust Operations (212) 658-5931
</TABLE>
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Senior Notes set forth below, pursuant to
the guaranteed delivery procedure described in "The Exchange Offer--Procedures
for Tendering Initial Notes" section of the Prospectus.
<PAGE>
<TABLE>
<S> <C>
Principal Amount of Old Senior Notes
Tendered:*/
- ---------------------------------------------
Certificate Nos. (if available):
- --------------------------------------------- If Old Senior Notes will be delivered by
Total Principal Amount Represented by book-entry transfer to The Depository Trust
Old Senior Notes Certificate(s): Company, provide account number.
$ ------------------------------------------ Account Number ------------------------------
</TABLE>
- --------------------------------------------------------------------------------
AN AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
<TABLE>
<S> <C>
X -------------------------------
------------
X -------------------------------
Signature(s) of Owner(s) -------------
or Authorized Signatory Date
</TABLE>
<TABLE>
<S> <C>
Area Code and Telephone Number:
-----------------------------
</TABLE>
Must be signed by the holder(s) of Old Senior Notes as their name(s)
appear(s) on certificate(s) for Old Senior Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
<TABLE>
<S> <C>
Name(s):
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------------------------
Address(es):
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
- ------------------------
*/ Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE>
GUARANTEE
The undersigned, a member of a registered national securities exchange, or a
member of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the United States,
hereby guarantees that the certificates representing the principal amount of Old
Senior Notes tendered hereby in proper form for transfer, or timely confirmation
of the book-entry transfer of such Old Senior Notes into the Exchange Agent's
account at The Depository Trust Company pursuant to the procedures set forth in
"The Exchange Offer--Procedures for Tendering Initial Notes" section of the
Prospectus, together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with any required signature
guarantee and any other documents required by the Letter of Transmittal, will be
received by the Exchange Agent at the address set forth above, no later than
three New York Stock Exchange trading days after the date of execution hereof.
<TABLE>
<S> <C>
- -------------------------------------- --------------------------------------
Name of Firm Authorized Signature
- -------------------------------------- --------------------------------------
Address Title
Name: --------------------------------
- --------------------------------------
Zip Code (Please Type or Print)
Area Code and Tel. No. ---------------- Dated: --------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD SENIOR NOTES WITH THIS FORM. CERTIFICATES
FOR OLD SENIOR NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
